It's a victory for decentralized finance as a U.S. federal court judge dismisses the lawsuit against DeFi startup, PoolTogether. The judge cited technical issues as the reason for striking out the case and stated that the federal law court system was not the appropriate avenue to address the concerns raised in the lawsuit concerns about the platform. The court didn't have enough power to pass judgment on the matter.
"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," Judge Frederic Block commented.
More Details About the PoolTogether Lawsuit
The lawsuit against PoolTogether 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 primary argument of this lawsuit was that the DeFi platform was breaking some gambling laws in the United States.
Some parts of PoolTogether governance were also pointed out. Kent pointed out that PoolTogether broke some parts of New York gambling laws and should be penalized by the judge. According to the original complaint, Kent said PoolTogether was guilty of "allowing people to evade financial regulations and scam consumers." Apparently, Kent, who previously worked for crypto skeptic Sen Elizabeth Warren (D-Mass), filed the lawsuit to find loopholes through which they can clamp down on decentralized finance firms.
The primary action PoolTogether took in creating the case was creating an NFT collection to help them cover the cost of the lawsuit. The NFT collection was named Pooly, and it helped the DeFi establishment to raise a whopping $135,000 worth of cryptocurrencies. All these were done within two hours of release.
This is not the first time a DeFi entity has been sued for violating a law. At least one month ago, DeFi Protocol Bancorp was sued by its investors for breaking several laws. The investors accused the DeFi platform of selling and buying illegal securities and lying about its impermanent loss protection mechanism (ILP).
DeFi Thriving Despite Clampdowns
While the crypto industry operates in shambles, the decentralized finance sector is thriving. Many experts have predicted that it won't stop anytime soon due to the increasing awareness about the sector's benefits.
Kyle Doane, a trader at crypto investment firm Arca, in an email to CoinDesk, mentioned that the DeFi space is not entirely affected by what is happening in the market because the "bad seeds" have been removed. He highlighted that some people were mainly in the crypto industry to enjoy the good times only. The series of unfortunate events that have happened in the past years has driven these "tourists" out of the industry.
"It's been a long crypto winter, and most 'tourists' have already left the space. The remaining participants are most likely more dedicated believers and, thus, less affected by the latest actions from the SEC. The tokens themselves being deemed securities have nothing to do with the viability of the underlying tech of DeFi and do not make the tokens/dApps any more or less valuable. These forces will likely only drive more financial activity to DeFi," Doane commented.