- SDNY Judge Katherine Polk Failla ruled that “self-driving” software Uniswap is not liable for losses suffered by users due to fraud and ponzis.
- Judge Failla, who has dismissed lawsuits against Uniswap, Paradigm, and others, is also presiding over SEC v. Coinbase.
- Cryptocurrency advocates have pointed to the industry’s growing momentum in the courts as a sign that the SEC may face defeat against Brian Armstrong’s cryptocurrency exchange.
- The SEC lost to Grayscale in court and a partial defeat in its securities campaign for Ripple’s XRP token.
Following a string of court victories amid a flurry of lawsuits from financial watchdogs like the Securities and Exchange Commission (SEC) and private opponents, the tide of justice could change for U.S. cryptocurrency service providers like Coinbase.
Uniswap wins lawsuit
On August 30, SDNY Judge Katherine Polk Failla ruled in favor of decentralized exchange Uniswap. The class action lawsuit sought to hold Uniswap, Paradigm, and others liable for user losses and damages caused by unlawful third-party actors.
The lawsuit’s claims centered on losses incurred by users investing in fraudulent tokens and cryptocurrency Ponzi schemes traded on Uniswap. Because the distributors were anonymous and difficult to track, the affected parties turned to Uniswap in the bidding.
Judge Failla said there was not enough evidence to prove that Uniswap developers were liable for the misuse of the software.
This ruling is a huge win for DeFi participants after the court ruled in favor of DeFi software and developers. Uniswap’s case also raises questions regarding the crackdown on Tornado Cash and its developers Alexey Pertserv, Roman Storm, and Roman Semenov. They were all arrested on charges related to cryptocurrency mixers.
Hope for Coinbase
SDNY Judge Katherine Polk Failla also presides over the case of SEC v. Coinbase, in which the SEC brought securities violation claims. Coinbase CEO Brian Armstrong and Chief Legal Officer Paul Grewal both restated the SEC’s claims, marking the beginning of a lengthy legal proceeding.
Grayscale won a victory against the SEC after 14 months in court with the Commission. The SEC flatly refused to allow Grayscale to convert its GBTC fund to a spot Bitcoin ETF, citing market manipulation concerns.
Three judges sided entirely with Grayscale and ruled against the SEC’s rejection of Grayscale’s ETF application.
“The Commission’s rejection of Grayscale’s motion was arbitrary and capricious because it failed to account for its different treatment of similar products,” the U.S. Court of Appeals for the D.C. Circuit said. The ruling pointed to the SEC’s approval of the Bitcoin Futures ETF, a similar product to the highly popular spot Bitcoin ETF.
“The courts remain our last and best hope,” said Coinbase CLO Paul Grewal after the news.