Court Labels Bitcoin and Ethereum as Commodities in Uniswap Lawsuit

By Kevin • September 2, 2023 11:09 pm • Comments

In a recent legal development, a U.S. court has classified both Bitcoin (BTC) and Ether (ETH) as commodities while dismissing a lawsuit against the decentralized finance (DeFi) platform Uniswap.

The lawsuit had accused Uniswap of allowing “scam tokens” to be issued and traded on its protocol, ultimately harming investors. However, a New York judge ruled that the decentralized crypto exchange could not be held responsible for the scams and declared both BTC and ETH as commodities in the official filing.

This decision highlights the ongoing conflict between the digital asset industry and U.S. regulators, particularly in distinguishing between securities and commodities.

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Gary Gensler, the chair of the U.S. Securities and Exchange Commission (SEC), has previously stated that Bitcoin is the only crypto commodity.

Watcher.guru reports:

A US court has officially called both Bitcoin (BTC) and Ether (ETH) commodities in the dismissal of a lawsuit against DeFi platform Uniswap.

Specifically, a New York judge stated it would not “stretch the federal securities laws to cover the conduct alleged” in the class action suit.

The complaint was directed at Uniswap for “scam tokens” that had been issued on the protocol.

Subsequently, the judge dismissed the allegations that the decentralized crypto exchange was to be held accountable for the scams that harmed investors. Moreover, calling both BTC and ETH commodities in the official filing.

However, this court ruling contradicts the SEC’s position and adds to the regulatory uncertainty surrounding cryptocurrencies in the United States.

The judge’s ruling emphasized that while no court had previously addressed the issue of decentralized protocol smart contracts, the contracts involved in this case were executed lawfully. Furthermore, the ruling explicitly stated that both Bitcoin and Ethereum are commodities and not securities.

This classification has significant implications for future litigation related to decentralized exchanges and potential violations of securities laws. It creates a point of contention with the SEC’s stance on digital assets.

The lawsuit against Uniswap, filed by a group of investors in April 2022, alleged that the DeFi platform violated U.S. securities laws by failing to register as an exchange or broker-dealer.

It claimed that Uniswap offered and solicited securities on an unregistered exchange, leading to investor losses due to scam tokens like EthereumMax (EMAX), Bezoge (BEZOGE), and Alphawolf Finance (AWF).

Yahoo reports:

But Wednesday’s ruling to scrap the suit before it goes to trial stated the true defendants of the case were the issuers of the “scam tokens” in question and not Uniswap.

While Securities and Exchange Commission (SEC) Chief Gary Gensler has so far shied away from calling ETH a security, Judge Katherine Polk Failla of the Southern District of New York directly called it a commodity and declined to “stretch the federal securities laws to cover the conduct alleged,” in the case against Uniswap.

The court’s opinion on its dismissal of the class action suit could influence future litigation against decentralized protocols and perhaps even those alleging violation of U.S. securities laws.

Judge Polk Failla also oversees the SEC lawsuit against Coinbase.

The court’s decision to dismiss the lawsuit before it went to trial was based on the argument that the actual defendants in the case were the issuers of the scam tokens, not Uniswap.

The judge’s characterization of Bitcoin and Ethereum as commodities and the refusal to stretch federal securities laws to cover the alleged conduct further solidified this outcome.

In conclusion, this court ruling has brought clarity to the classification of Bitcoin and Ethereum as commodities and underscores the complexity of crypto-related regulatory matters in the United States.

It may influence future legal actions involving decentralized protocols and potential violations of securities laws, highlighting the need for regulatory clarity in the cryptocurrency space.

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