Second Circuit Court Rules on Crypto Liability and Gun Laws

The United States Court of Appeals for the Second Circuit recently issued two significant rulings affecting both digital asset platforms and state firearm regulations. In the legal dispute Risley v. Uniswap, the court affirmed that decentralized exchange operators cannot be held liable for fraud committed by third-party token issuers simply by providing the underlying software [2]. Separately, a three-judge panel from the same court struck down a New York law, often called the "vampire rule," which had effectively banned concealed carry on private property open to the public unless owners explicitly posted signs permitting it [1].

Key takeaways

• The Second Circuit ruled that Uniswap Labs is not liable for third-party fraud because creating a smart contract does not constitute substantial assistance in a scam [2].
• Plaintiffs in the Uniswap case failed to prove the platform had actual knowledge of specific "rug pulls" or "pump and dump" schemes at the time they occurred [2].
• The court struck down New York’s "vampire rule," ruling that the default ban on concealed carry in public-facing private property violates the Second Amendment [1].
• The gun carry ruling maintains that while business owners may still prohibit firearms via signage, the state cannot impose a default ban on ordinary citizens in commercial spaces [3].

Limits on Platform Liability for Crypto Fraud

In the Risley v. Uniswap case, the court addressed whether a decentralized exchange could be held responsible for losses incurred by users during "rug pulls" and "pump and dump" schemes [2]. The district court, acting on remand from the Second Circuit, determined that the platform’s role in providing code and liquidity pools did not equate to knowingly facilitating illegal activity [2]. The court compared the exchange to a bank or a messaging platform like WhatsApp, noting that providing a neutral environment for interaction does not make a service provider liable for the criminal acts of its users [2]. To succeed in such claims, plaintiffs would need to demonstrate that the platform had actual knowledge of specific frauds and took affirmative steps to conceal or advance them, which the court found was not established in this instance [2].

Constitutional Challenges to New York Firearm Laws

The Second Circuit’s decision regarding New York’s firearm regulations centered on the "vampire rule," a provision requiring private property owners to post signs if they wished to allow concealed carry [1]. The court ruled that this requirement failed to align with the nation’s historical tradition of gun regulation, as established by the Supreme Court’s Bruen decision [1]. While the state argued that the law allowed property owners to decide their own policies, the court found that the default ban effectively prohibited carry in most commercial establishments because many owners would likely fail to post the required signs [1]. Although the panel struck down this default ban, it upheld other restrictions, including those prohibiting firearms in sensitive locations such as public parks and transit hubs [3].