A court in New York has officially categorized popular cryptocurrencies ether (ETH) and bitcoin (BTC) as “commodities.” This decision was made as part of the court’s ruling to dismiss a proposed class action lawsuit aimed at the prominent decentralized cryptocurrency exchange, Uniswap.
As per media reports, the lawsuit, initially filed in April 2022 by a group of investors against Uniswap and its founder Hayden Adams, alleged that the decentralized finance (DeFi) platform had violated U.S. securities laws. The accusation was centered around Uniswap’s failure to register as an exchange or broker-dealer, and its involvement in offering and soliciting securities on an unregistered exchange.
The lawsuit sought to hold Uniswap accountable for the losses suffered by investors due to fraudulent tokens that had been issued and traded on the platform. Some of the tokens mentioned in the lawsuit included Ethereum (ERC-20) tokens like EthereumMax (EMAX), Bezoge (BEZOGE), and Alphawolf Finance (AWF).
However, the court ruling on Wednesday dismissed the lawsuit prior to a trial, asserting that the primary defendants in this case were the creators and issuers of the aforementioned “scam tokens,” not Uniswap itself.
Notably, while the head of the Securities and Exchange Commission (SEC), Gary Gensler, refrained from classifying ETH as a security, Judge Katherine Polk Failla of the Southern District of New York directly classified it as a commodity.
Furthermore, she declined to interpret federal securities laws in a way that would encompass the alleged misconduct in the case against Uniswap.
This court decision’s significance extends beyond this particular case, potentially shaping the landscape of future litigation involving decentralized protocols and even cases concerning the violation of U.S. securities laws.
Judge Polk Failla, who is also presiding over the SEC’s lawsuit against Coinbase, emphasized that the decentralized nature of the Uniswap Protocol rendered the identification of scam token issuers virtually impossible. This lack of “identifiable defendant” led to the dismissal of the case.
Judge Polk Failla clarified that the plaintiffs’ argument suggesting Uniswap’s role in facilitating trades was akin to a manufacturer’s involvement in a product’s defect was unfounded. Instead, the court likened it to holding a platform like Venmo or Zelle responsible for an illicit transaction conducted using their services.
