New York court has classified Ethereum (ETH) and Bitcoin (BTC) as “commodities” while dismissing a proposed class action lawsuit against the prominent decentralized cryptocurrency exchange, Uniswap. The lawsuit, filed in April 2022, alleged that Uniswap and its creator, Hayden Adams, violated U.S. securities laws by failing to register as an exchange or broker-dealer and by permitting the issuance and trading of “scam tokens” on the platform.

The lawsuit specifically named Ethereum-based (ERC-20) tokens such as EthereumMax (EMAX), Bezoge (BEZOGE), and Alphawolf Finance (AWF) as examples of the alleged scam tokens that resulted in investor losses.

Judge Katherine Polk Failla of the Southern District of New York, who also presides over the SEC lawsuit against Coinbase, delivered the ruling. She classified ETH as a commodity, a significant departure from the SEC’s position on Ethereum. It’s worth noting that the SEC Chief, Gary Gensler, has refrained from categorizing ETH as a security.

The court’s decision to dismiss the class action suit could have far-reaching implications for future litigation concerning decentralized protocols and potential breaches of U.S. securities laws.

In her judgment, Judge Polk Failla contended that the true defendants in the case were the issuers of the scam tokens, not Uniswap. Given the decentralized nature of the Uniswap Protocol, identifying these issuers was deemed “unknown and unknowable,” leaving no identifiable party to hold responsible in the lawsuit.

Regarding Uniswap’s role, the court rejected the plaintiffs’ argument that the platform facilitated these transactions by providing a marketplace and infrastructure for the exchange of securities. The court drew a parallel to holding applications like Venmo or Zelle accountable for unlawful transactions, highlighting the absence of pertinent cryptocurrency regulations.

In concluding the ruling, the court suggested that addressing such concerns should fall under the purview of Congress rather than the judicial system.

This ruling signifies a significant development in the legal landscape surrounding cryptocurrencies and their classification, potentially influencing future cases involving decentralized platforms and digital assets.

ADVERTISEMENT

Disclaimer: This article is based on information available as of August 31, 2023. It is intended for informational purposes only and should not be considered legal or investment advice. Readers are encouraged to seek guidance from qualified professionals regarding cryptocurrency-related legal matters.