Lawsuit against DeFi firm PoolTogether dismissed in court

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Key Takeaways

  • Court stated the plaintiff, Joseph Kent, can’t pursue a lawsuit because he “suffered no concrete harm at the hands of the defendants.” 
  • PoolTogether launched an NFT collection called “Pooly” to raise funds to fight the case. 

A United States federal court judge has dismissed a lawsuit against decentralized finance (DeFi) platform PoolTogether, asserting that the federal court system is not the appropriate venue to address concerns regarding the startup.

In the ruling, U.S. District Court Judge Frederic Block emphasized that the plaintiff, Joseph Kent, lacked standing to pursue the lawsuit, as he had not suffered any concrete harm at the hands of the defendants. Kent filed the lawsuit in October 2021, alleging that PoolTogether, a popular DeFi platform, violated gambling laws in the state of New York by enabling individuals to evade financial regulations and scam consumers.

He further characterized the platform as “an old-fashioned numbers racket.” However, Judge Block determined that although Kent had genuine concerns about PoolTogether’s legality under New York law, there were better forums to address them than a federal court.

“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,” stated Judge Frederic Block in the order.

In response to the legal challenge, PoolTogether released a non-fungible token (NFT) collection called “Pooly” to raise funds for its defense. In 2022, the DeFi startup successfully raised 769 Ether, equivalent to approximately $1.4 million, by selling Pooly NFTs. The raised funds were utilized to counter the lawsuit, which some community members perceived as an attack on the broader DeFi sector.

The judge emphasized that for a plaintiff to have standing, the harm they claim to have suffered must align with the injuries they seek a remedy for in court. In this particular case, Judge Block identified a mismatch, resulting in the dismissal of the lawsuit.

Despite the dismissal, Judge Block highlighted that Kent remains free to pursue his claims in state court. Additionally, any ancillary issues raised in the dismissal motions that were left unanswered should be resolved by the New York Court of Appeals.

This case holds significance as several prominent Defi platforms are fighting in court to dismiss their litigation. The lawsuit also brought into light the much-heated debate on whether the current Defi space is really decentralised.

When the platform was slapped with a lawsuit, the PoolTogether project founder Leighton Cusack described it as “clearly written by someone who doesn’t understand how protocols operate or even what PoolTogether is.”

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Saniya Raahath
Saniya Raahath

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