Key Highlights
- Judge Failla permanently dismissed all remaining state-law claims against Uniswap Labs, its Founder Hayden Adams, and its VC backers.
- The court ruled it ‘defies logic’ to hold open-source developers liable for how autonomous, deployed smart contracts are later used by third parties.
- The ruling weakens the SEC’s ongoing arguments in related crypto cases and follows its 2025 withdrawal of a Wells Notice against Uniswap Labs.
Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York dismissed the remaining state-law claims against Uniswap Labs and its Founder Hayden Adams with prejudice, effectively ending a class action lawsuit. The court ruled that the decentralized exchange developer cannot be held liable for scam tokens created and traded by unidentified third-party issuers on its protocol.
The lawsuit, formally known as Risley v. Universal Navigation Inc., was filed in April 2022 by a group of retail investors led by plaintiff Nessa Risley in the Southern District of New York. They sued Uniswap Labs along with its Founder Hayden Adams and a roster of prominent venture capital firms, including Andreessen Horowitz (a16z), Paradigm, and Union Square Ventures.
The plaintiffs alleged losses on 38 different tokens they described as “scam tokens”—instruments they claimed were used in fraudulent “rug pull” and “pump-and-dump” schemes between 2021 and 2022. Because these tokens were traded on Uniswap’s protocol, the investors argued Uniswap should be held accountable as an unregistered securities exchange that had facilitated the fraud.
Financial markets responded immediately. Uniswap’s native governance token, UNI, rallied approximately 6%, trading near $3.97 in the hours following the ruling. For Hayden Adams, the ruling was also a personal vindication.
On X, Adams wrote, “Uniswap wins another case that sets a new legal precedent. If you write open-source smart contract code, and the code is used by scammers, the scammers are liable, not the open-source devs. Good, sensible outcome.”
The stakes extended far beyond any individual plaintiff’s losses. A ruling in favor of Risley would have set a precedent holding open-source software developers liable for every downstream misuse of their tools. For a technology ecosystem built on open, composable, and often anonymous code, that exposure could have been existential.
What the court ruled
Judge Failla issued the final dismissal with prejudice on March 2, 2026 — meaning the plaintiffs may not refile these claims in federal court. The ruling covered the remaining state-law claims of fraud, negligent misrepresentation, and unjust enrichment after federal securities claims had already been dispatched in an earlier phase of litigation.
On each count, the court’s reasoning was precise and, in some respects, philosophically pointed:
Neutral infrastructure
The judge determined that Uniswap, as a platform where tokens are traded, does not provide “substantial assistance” to fraud merely by existing and processing transactions. In her earlier 2023 opinion, she drew a vivid comparison: Uniswap is akin to Venmo or Zelle — a financial conduit. Just as those payment platforms are not liable when a user transfers money for a drug deal, Uniswap cannot be blamed for criminal use of its infrastructure by unknown third parties.
Code vs. Conduct
Perhaps the most consequential philosophical finding: the court held that it “defies logic” to hold developers of computer code responsible for how third parties use that code once it has been deployed and operates autonomously. In other words, the architect who builds the road cannot be arrested for every hit-and-run that occurs on it.
No unjust enrichment
On the unjust enrichment claim, the court found that Uniswap did not directly profit from the alleged scams. During the 2021–2022 period in question, the protocol’s “fee switch” — which would allow Uniswap Labs to collect a portion of trading fees — had not been activated. Without direct financial benefit derived from the fraud, the unjust enrichment theory could not stand.
Commodity status for ETH and BTC
In the earlier 2023 phase, Judge Failla explicitly characterized Bitcoin (BTC) and Ethereum (ETH) as “crypto commodities” — not securities. This classification, embedded in the court record of a case presided over by the same judge handling Securities and Exchange Commission (SEC) v. Coinbase, has since become a legal reference point for the broader industry’s argument that major cryptocurrencies fall under Commodity Futures Trading Commission (CFTC) jurisdiction, not SEC oversight.
SDNY and its outsized influence
The Southern District of New York (SDNY) is not merely a federal courthouse on Foley Square in Manhattan — it is the most consequential financial litigation venue in the United States. Cases decided here routinely set standards that reshape industries, and Judge Failla’s courtroom has become an unlikely center of gravity for crypto jurisprudence.
Crucially, Judge Failla’S characterizations of Ethereum as a “crypto commodity” in the Uniswap proceedings have material bearing on arguments Coinbase is making in its own defense. If the same judge who declared ETH a commodity in one landmark case reaches similar conclusions in the SEC’s action against Coinbase, it would represent a seismic defeat for the SEC’s theory that most cryptocurrencies are securities.
The ‘sue-first’ counterfactual
To understand why the DeFi community erupted in relief following the March 2 ruling, it helps to consider what the alternative would have looked like.
Had the plaintiffs succeeded, any developer who published open-source code — a smart contract, a wallet interface, a bridge protocol, or even an RPC endpoint — could have faced civil liability every time an unknown bad actor exploited, misused, or simply used that code in connection with a fraudulent scheme. The practical effect would have been a chilling “sue-first” legal environment in which developers either obtained expensive legal insurance, geo-blocked users from the United States, or abandoned public code projects entirely.
The DeFi Education Fund, an industry advocacy group, noted that the ruling protects “neutral crypto plumbing” — the unsexy but essential infrastructure of wallets, RPC nodes, and bridge protocols — from being conscripted into liability every time a scammer passes through them. Brian Nistler, General Counsel at Uniswap Labs, called it “another precedent-setting ruling for DeFi,” emphasizing that the court rejected attempts to make facilitators responsible for the actions of unknown third parties.
Ruling reshapes the regulatory landscape
The dismissal does not exist in a vacuum. Its downstream effects on federal regulators — both the SEC and the CFTC — are already being felt.
The SEC’s retreating battlefront
The SEC’s February 2025 withdrawal of its Uniswap Wells Notice was framed by the agency as a strategic pivot under new leadership. But legal observers widely interpreted the move as a recognition that the Risley rulings had effectively demolished the evidentiary and legal theory the agency would need to prevail. The SEC does not easily abandon enforcement actions — doing so against one of DeFi’s most visible protocols was a significant concession.
Meanwhile, Judge Failla’s ETH-as-commodity language haunts the SEC’s ongoing case against Coinbase — an exchange the SEC alleges has been operating as an unregistered securities exchange by facilitating trades in tokens it considers securities. If Ethereum, the backbone of most tokens the SEC might target, is a commodity rather than a security, the agency’s case for sweeping secondary-market regulation becomes markedly harder to sustain.
The CFTC and the ‘sufficient decentralization’ safe harbor
The CFTC has pursued enforcement actions against smaller, less decentralized DeFi protocols — including Opyn and Deridex — with some success. But the Risley dismissal creates a new analytical framework: for a protocol whose smart contracts are genuinely autonomous and self-executing, it becomes legally untenable to argue that any identifiable party is “operating” an exchange in the traditional regulatory sense. The more decentralized the protocol, the further outside the CFTC’s enforcement grasp it falls.
DeFi’s long road to legal legitimacy
The Risley case emerged at a moment when the post-2021 crypto boom was colliding with an aggressive U.S. regulatory posture. The spectacular collapses of Terra/LUNA in May 2022, Celsius in July 2022, and FTX in November 2022 had created enormous political pressure on regulators to demonstrate oversight — and plaintiff lawyers eager to pursue claims against any identifiable, well-funded participant in the crypto ecosystem.
In that environment, Uniswap Labs was a logical target. Unlike anonymous protocol contributors, it was a registered U.S. company, had raised venture capital from known institutional investors, and had a public founder. But the case ultimately ran into a fundamental problem: the plaintiffs could not coherently connect the protocol’s decentralized, autonomous mechanics to the specific frauds they alleged.
The ruling now joins a small but growing body of case law that courts and regulators will have to grapple with as DeFi matures. It joins Commodity Futures Trading Commission v. Ooki DAO and Tornado Cash-related decisions in sketching out the contours of where DeFi liability begins and ends — questions that remain far from fully resolved, but that the Risley dismissal has answered, at least in part, in the industry’s favor.
Also Read: Bitwise Files with the SEC to Launch First Ever Uniswap ETF
