23-1340
2d Cir.Feb 26, 2025Background
- Plaintiffs brought a class action against Universal Navigation Inc. (Uniswap Labs), its CEO, associated venture capital firms, and the Uniswap Foundation, alleging losses from fraudulent token activity on the Uniswap Protocol, a decentralized cryptocurrency exchange.
- The key allegations involved third-party “scam tokens” and fraudulent schemes like “rug pulls” and “pump and dumps” conducted via Uniswap’s decentralized smart contracts.
- Plaintiffs claimed violations of Sections 5, 12(a)(1), and 15 of the Securities Act and Section 29(b) of the Exchange Act, as well as state law securities and fraud claims.
- The district court dismissed all federal claims, holding Uniswap/Labs and its stakeholders were not statutory sellers or liable under control theories, and declined supplemental jurisdiction over state law claims.
- The appeal challenged dismissal of federal claims and argued state law claims were incorrectly dismissed for lack of jurisdiction despite satisfaction of the Class Action Fairness Act (CAFA).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Uniswap Labs and related defendants statutory sellers under Section 12(a)(1) for scam token sales? | Defendants are sellers because their protocol enables the transactions and they profit from trading fees. | Only token issuers/liquidity providers, not protocol hosts, sell tokens—Uniswap Labs is merely a facilitator. | Uniswap not a statutory seller; dismissal affirmed. |
| Are Uniswap Labs et al. liable under a solicitation theory for Section 12(a)(1) claims? | Uniswap's promotion and social media posts constitute solicitation, tying them to scam token sales. | Promotional statements and operating the platform are too attenuated from plaintiffs’ scam token purchases. | No successful solicitation; dismissal affirmed. |
| Can Plaintiffs rescind under Section 29(b) due to unlawful contract formation involving smart contracts on the Protocol? | Smart contracts used for trades are unlawful contracts made in violation of the Exchange Act. | Smart contracts are facilitators/user agreements between traders, not contracts between plaintiffs and defendants. | No unlawful contract between plaintiffs and defendants; dismissal affirmed. |
| Did the district court err in dismissing state law claims for lack of jurisdiction? | Jurisdiction established under CAFA; the district court should review state law claims on the merits. | Remand appropriate if CAFA jurisdiction exists. | Dismissal vacated; remanded for consideration of state law claims. |
Key Cases Cited
- Pinter v. Dahl, 486 U.S. 622 (U.S. 1988) (defines “statutory seller” under Section 12 of the Securities Act; important for determining seller liability)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (discusses pleading standards; relevant for motion to dismiss)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (sets plausibility standard for pleadings)
- City of Pontiac Gen. Emps.' Ret. Sys. v. MBIA, Inc., 637 F.3d 169 (2d Cir. 2011) (standard for reviewing a motion to dismiss)