A long-running lawsuit against Uniswap Labs that alleged the decentralized exchange developer was responsible for scam tokens and so-called rug pulls traded on its protocol came to an end after a federal judge dismissed the claims on Monday.

Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York has dismissed the lawsuit with prejudice, arguing that plaintiffs cannot hold Uniswap liable for alleged fraud committed by unidentified third-party token issuers on its protocol.

She added that Uniswap created an environment “where fraud could exist,” but that does not equate to “assisting in its perpetration.”

“Plaintiffs are basically alleging that Defendants substantially assisted fraud by providing ordinary services that anyone could use for lawful purposes, but that some used for unlawful purposes,” Judge Failla wrote in her opinion.

The lawsuit was initially filed in April 2022 and sought to hold Uniswap Labs and its founder, Hayden Adams, accountable for what it described as “rug pulls” and pump-and-dump schemes that it claimed the platform facilitated.

The dismissal follows an amended complaint from the plaintiffs filed in May, which focused on alleged state level consumer protection violations.

During the August 2023 ruling, Judge Failla claimed that Uniswap cannot be held accountable, as the allegations against the company lack sufficient factual evidence to support liability.

Justice served

Commenting on the win, Hayden called the ruling a “good, sensible outcome”, which he said sets a legal precedent that writing open source smart contract code does not make a developer liable if that code is later used for malpractice or fraud by third parties.

Similarly, others within the DeFi space, for instance, Aave founder and CEO, also celebrated the development, calling it a “great with for DeFi.”

Uniswap (UNI), the native token for Uniswap, rallied nearly 6% to $3.92 after news broke, but has since receded to $3.88 at press time.