sandmark.com
A US district court has ruled that open source developers cannot be held liable for the illegal activities of third parties who use their code. On 2 Mar, Judge Katherine Polk Failla of the Southern District of New York dismissed the remaining claims in a class action lawsuit against Uniswap Labs and its founder, Hayden Adams. The lawsuit, filed in April 2022, alleged that the defendants were responsible for financial losses caused by scam tokens traded on the protocol.
Uniswap is a decentralised exchange built on the Ethereum blockchain that allows users to swap tokens through automated liquidity pools rather than centralized intermediaries. Following the news of the dismissal, the native UNI token rose to a 4-day high of $4.04 by 1600 UTC. In her 32-page opinion, Failla stated that providing a platform where fraud occurs is not equivalent to assisting that fraud, comparing the protocol's role to that of a bank or a messaging service used by bad actors.
Protocol developers not liable for user misuse
The judge dismissed the case with prejudice, preventing the plaintiffs from refiling the same allegations. The ruling reinforces the legal standing of decentralized finance (DeFi) protocols as neutral infrastructure. Uniswap founder Hayden Adams described the result as a sensible outcome, noting that liability for scams remains with the perpetrators rather than the developers of open source smart contract code.
The decision follows a period of regulatory scrutiny for the firm, including a previous Wells Notice issued by the SEC in 2024. However, the regulator closed its multi-year investigation last year without taking further action. Brian Nistler, General Counsel at Uniswap, noted on X that the ruling sets a significant precedent for the industry.
Shift in regulatory approach under Trump administration
The dismissal is emblematic of a broader shift in US policy toward the Web3 industry. Under the Trump administration, there has been a move away from the "regulation by enforcement" stance that characterised previous years.