Second Circuit Affirms Dismissal of Federal Securities Law Claims Against Morrison Cohen Client Uniswap Foundation and Others

In a landmark ruling, the Second Circuit upheld the dismissal of federal securities law claims against Morrison Cohen client Uniswap Foundation, as well as several other developer and investor defendants, affirming that the defendants were not responsible for losses allegedly suffered by users who purchased so-called “scam tokens” traded on the decentralized cryptocurrency exchange Uniswap Protocol.

Uniswap Foundation is a non-profit formed to support the growth, decentralization, and sustainability of decentralized finance and the Uniswap Protocol. Plaintiffs, on behalf of a putative class, also sued Uniswap Labs and various venture capital investors, alleging that even though the defendants did not issue the “scam tokens,” they did not stop the tokens from trading on the Uniswap Protocol. In August 2023, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York granted the defendants’ motions to dismiss in their entirety.

On February 26, 2025, the Second Circuit affirmed the dismissal of the federal securities law claims. The Second Circuit held that the defendants were not “statutory sellers of the tokens at issue,” which is a prerequisite to bring a claim under Section 12(a)(1) of the Securities’ Act. The defendants were “participants only remotely related to the relevant aspects of the sales transactions, such as those whose involvement is only the performance of their professional services.” “Extending such liability” to the defendants under the Securities Act “would be akin to holding the NASDAQ or the New York Stock Exchange liable as facilitators of any fraudulent stock purchase on their exchanges.” And the “Defendants’ promotion of their platform on social media or use of the platform to sell their own issued token, UNI, does not render them statutory sellers of securities to warrant liability under the Securities Act.”

In affirming the dismissal of the plaintiffs’ claim under Section 29(b) of the Exchange Act, the Second Circuit “agree[d] with the district court that it ‘defies logic’ that a drafter of a smart contract, a computer code, could be held liable under the Exchange Act for a third-party user's misuse of the platform.”

Uniswap Foundation is represented by Jason Gottlieb, Michael Mix and Vani Upadhyaya. The law firms representing other defendants included Debevoise & Plimpton LLP, Skadden, Arps, Slate, Meagher & Flom LLP and Latham & Watkins LLP.

The case was covered in Law360. Subscribers may read more here.