The crypto world dodged a bullet this week when a New York federal judge shot down claims that the Uniswap should compensate those who got fleeced buying scam tokens on the decentralized platform. The judge not only got the reasoning right but issued an opinion that shows a remarkable level of sophistication when it comes to crypto.
In her 51-page decision, Judge Katherine Polk Failla shows she is fluent in decentralized finance, writing confidently about smart contracts, liquidity pools, pump-and-dumps, rug pulls and more—remarkable given that five years ago courts were struggling to explain what a blockchain was. More important, Failla also chose correctly among two competing vehicle metaphors.
The plaintiffs—or more accurately their class-action lawyers—argued that Uniswap was like a driverless car maker that had built dangerous vehicles that were crashing all over the roads. Uniswap's counsel, meanwhile, said making the company liable for scam tokens would be like blaming the self-driving car maker if criminals used their vehicle to rob a bank. Failla agreed with the latter argument.
The judge also acknowledged there is a policy void when it comes to crypto but declined to rush in and fill it, noting the task is likely best left to Congress. While there are a number of important nuances to Failla's ruling that underscore how the crypto industry is hardly out of the regulatory woods, she got the broad strokes right when it comes to both crypto and open-source development.
This outcome likely has to do with the upstanding nature of Uniswap and its founder, Hayden Adams, who by all indications is one of the good guys in an industry filled with rogues. The situation is very different from that of the Ethereum "mixer" Tornado Cash, which Leo wrote about this week. While that case also involves the right to build software, there appears to be clear evidence that the men who built the platform did so in order to carry out criminal activities. It's a case that, when decided, risks proving the adage that "bad facts make bad law."
Both the Uniswap and Tornado Cash cases, though, will likely prove to be a sideshow compared to the main event, which is when a court will have to rule on the SEC's claim that Coinbase broke the law by allegedly selling unregistered securities on its platform. It's notable that this case is also in the hands of the capable Judge Failla. It is one to watch.
On a final note, Leo and I will be hosting talks at Mainnet, which begins on Sept. 20 in New York City. The annual event is stuffed with headliners, including Coinbase's Brian Armstrong, and has become the preeminent crypto conference of the season. (As a media partner, Fortune has arranged a discount code for our readers—use Fortune300 when you register here). In the meantime, have a relaxing Labor Day weekend—we will be back in your inbox on Tuesday morning.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
