Lawsuit against DeFi startup PoolTogether dismissed by US Judge.

On Wednesday, a federal judge dismissed a lawsuit against DeFi startup PoolTogether, stating that the federal court system was not the appropriate venue to address concerns about the platform. “While Kent no doubt has genuine concerns about PoolTogether—including its legality under New York law—a suit in federal court is not an appropriate way to address them,” said Judge Frederic Block in the order.

The lawsuit was filed by former congressional staffer Joe Kent in the U.S. District Court for the Eastern District of New York in October 2021. The original complaint alleged that the DeFi platform violated New York state’s gambling laws by allowing people to evade financial regulations and scam consumers. Kent, who previously worked for crypto skeptic Sen Elizabeth Warren (D-Mass), filed the suit as a test case as legislators explored avenues to pursue legal actions against DeFi actors.

In response to the lawsuit, PoolTogether released an NFT collection called “Pooly” to raise funds to fight the case. The platform raised roughly $135,000 worth of cryptocurrencies within just two hours of the collection’s drop.

Although the case was dismissed, it does not mean that the DeFi space is immune to litigation. In fact, investors sued DeFi protocol Bancor last month for allegedly deceiving investors about its impermanent loss protection mechanism (ILP) and operating as an unregistered security. Additionally, DeFi is facing increased scrutiny from regulators amid U.S. regulators’ broader crackdown on the crypto industry. In March, the SEC subpoenaed DeFi protocol SushiSwap and its “Head Chef” Jared Grey.

• DeFi trading volumes increase by 444% due to SEC’s crackdown on blockchain and Binance.
• Aave nears launch of GHO stablecoin on Ethereum.
• Defactor tokenizes $100M in bonds for small business lending.

Edited by James Rubin.