Case against DeFi saving app, PoolTogether, dismissed
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Shoshana Gordon/Axios
Federal Courts have essentially punted on a case against a small crypto application called PoolTogether.
Why it matters: A ruling was supposed to provide some sense of how courts viewed the decentralization claims of projects like this one, but — since the case was simply dismissed on grounds of standing — the world is no clearer on this point either.
Catch up fast: Plaintiff Joseph Kent put a small amount of money into PoolTogether and then brought a lawsuit against it for operating what he called an illegal lottery.
- The court held Wednesday that lawsuits against projects like PoolTogether need to demonstrate a real harm to the parties, a standard it did not believe Kent had met.
What they're saying: "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 wrote in his decision.
Yes, but: The plaintiff plans to pursue the case in state courts. Charles Gerstein, one of his attorneys, told Axios via a spokesperson, "Crypto ventures like PoolTogether are not free to ignore the law simply because they do not like the law."
PoolTogether founder Leighton Cusack declined to comment, but he did post on Twitter, "PoolTogether Inc is extremely happy with the results of [Tuesday’s] hearing."
How it works: PoolTogether is a no-loss lottery. Users deposit funds into a group pool and, periodically, one user wins the interest earned by the whole pool.
- But no one ever loses their deposit. They just lose an opportunity cost of the interest, which is still a loss of course.
- It's not a new idea. Elsewhere, it's sometimes called a "prize-linked savings account."
Flashback: In 2022, PoolTogether sold an NFT to raise funds for its legal defense.
- It was called Pooly.
By the numbers: PoolTogether is a small project. It has $13.9 million committed to its various pools. It's not even in the top 100 decentralized finance protocols.
- However, it is backed by some of the most notable investors in the industry, many of whom were also named as defendants in the case.
- Its POOL token trades at $0.67, down from $0.72 yesterday.
Go deeper
