United States District Court Judge Katherine Polk Failla has dismissed the class action suit against the decentralized exchange Uniswap, calling ETH a commodity in the dismissal order.
Judge Katherine is also the Judge overseeing the United States Securities and Exchange Lawsuit against Coinbase.
ETH A Commodity According To Judge Failla
The lawsuit against Uniswap was brought by users of the decentralized exchange who claimed that they lost significant sums of money due to scam tokens being listed on the exchange. The six individuals who filed the suit had bought tokens on the decentralized exchange between December 2020 and March 2022. They told the court they were arguing on behalf of a “nationwide class of users” that Uniswap controlled liquidity pools on the protocol. They alleged that the decentralized exchange also controlled the pools created by scammers to whom they lost their money to.
In her dismissal order, the Judge wrote that Bitcoin (BTC) and Ether (ETH) were considered as “crypto commodities.” The Judge also made the distinction as part of her reasoning behind dismissing the lawsuit, stating that she was not convinced by the argument that Uniswap’s token sales were subject to the Exchange Act. Users on social media platform X, with Bill Hughes, a lawyer at ConsenSys, stating,
“The SDNY (Failla, J.) also explicitly found in its August 29 decision in Risely v. Uniswap that Ethereum is a commodity, not a security. No analysis of the issue, just the conclusion, but still, pretty definitive statement if you ask me.”
Judge Failla is also overseeing the lawsuit against Coinbase, filed by the United States Securities and Exchange Commission. She is highly experienced in crypto cases, having overseen several in the past. This includes a class action lawsuit involving Tether and Bitfinex. Judge Failla wrote in her dismissal order,
“This case is more like an effort to hold a developer of self-driving cars liable for a third party’s use of the car to commit a traffic violation or to rob a bank.”
Uniswap is a decentralized protocol, which means it cannot control which tokens are listed on the platform or who interacts with it.
What Is ETH’s Legal Classification?
Judge Failla’s comments cannot be seen as a distinct ruling on ETH’s legal classification within the United States. However, it comes at a crucial point, with several other judges making important decisions and rulings on crypto. This includes the July ruling that classified XRP as a security when it was sold to institutional investors. Recent years have seen the United States Securities and Exchange Commission and the Commodity Futures Trading Commission butt heads over which body has jurisdiction over cryptocurrencies. Gary Gensler, the current SEC Chair, has claimed that everything apart from Bitcoin is a security and falls under his agency’s jurisdiction. However, the Commodity Futures Trading Commission has claimed ETH and other cryptocurrencies are commodities, as stated in a suit filed against Binance for alleged violations of the Commodities Exchange Act.
Lawmakers Still Undecided
US lawmakers have been slow to decide whether the Securities and Exchange Commission or the Commodity Futures Trading Commission will regulate crypto. Currently, there are several bills to provide regulatory clarity over digital assets making their way to Congress. Each of these bills varies in how authority is distributed between regulatory bodies. Some bills, such as the Financial Innovation and Technology for the 21st Century Act, aim to create a process that will categorize crypto assets as securities or commodities.
Other bills, such as the Digital Commodity Exchange Act, look to transfer power entirely to a regulator. Meanwhile, bills, such as the Digital Asset Market Structure Bill, propose seeing cryptocurrencies be certified by the Securities and Exchange Commission before being given commodity status.
Win For Crypto
However, the ruling is still a big win for crypto, as it clarifies how US securities law could apply to decentralized finance. The case could also be used as a precedent to defend DeFi protocols against similar lawsuits in the future. The ruling also comes just a week after Tornado Cash founder Roman Storm was arrested, with the crypto community concerned about recent attacks by law enforcement on decentralized software development. Storm is currently out on bail.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.