PoolTogether Inc., the Delaware corporation responsible for the blockchain-based app PoolTogether, is facing a class-action lawsuit in federal court. Filed by a software engineer named Joseph Kent, the lawsuit challenges the legality of PoolTogther’s protocol under New York’s laws against “lottery operations.”
PoolTogether Battles Lawsuit
Filed in late October, the suit names PoolTogether Inc. as well as one of the protocol’s founders, Leighton Cusack, as defendants. Furthermore, Mr. Kent has added individual investors such as Stanislav Kulechov, founder and CEO of Aave, as part of the lawsuit.
Essentially, the lawsuit challenges the legality of PoolTogther’s operation. By describing PoolTogether’s protocol as a “Lottery Scheme,” which is illegal under New York Law, Kent has argued the protocol doesn’t qualify as any of the institutions permitted under U.S. law to run “prize-linked savings accounts”. Filing under New York state law allows a person who purchases an illegal lottery ticket to bring a class-action lawsuit on behalf of themselves and other ticket-holders.
Moreover, as the case primarily targets Pool, Mr. Kent has included many individuals associated with the project, from founders to investors. Although Mr. Kent’s accusations could be seen by some as sitting on a flimsy foundation, this case is interesting. When asking who will be held legally accountable when one of these “protocols” causes financial harm, many are left scratching their heads.
In his complaint, Kent goes on to describe himself as being “gravely concerned about the cryptocurrency ecosystem. Which requires enormous amounts of electricity – accelerating climate change and allowing people to evade financial regulations and scam consumers.”
In a filing last month, Brian Klein, a lawyer for PoolTogether Inc, said the lawsuit was purely foolish.
“This apparently ideologically driven lawsuit is a waste of the court’s and everyone else’s time.”
Additionally, another lawyer for PoolTogether Inc, Kevin Broughel, commented on the true nature of PoolTogether’s Protocol. Kevin responded that the company “Doesn’t own or control the protocol.”. Continuing that its functions are “governed by its original coding.”. Which can only be modified by a majority vote of holders of its proprietary token, called POOL.
Furthermore, Mr. Broughel expressed skepticism of Mr. Kent’s motives regarding PoolTogether. Broughel concluded that Mr. Kent’s $10 deposit was an apparent effort to create standing for his lawsuit. Moreover, Broughel debated that the PoolTogether protocol isn’t a lottery and that deposits made by “savers” don’t qualify as the purchase of lottery tickets.
Help Through NFTs?
While facing a lawsuit, the crypto community has rallied to help PoolTogether and Cusack. Through an NFT Pooly drop, those looking to support PoolTogether can mint NFTs in three editions for .1 ETH, 1 ETH, and 75 ETH each. The proceeds will go towards Pool Together Inc.’s legal expenses.
Within two hours of its launch, the collection had raised 73 ETH with its target goal at 769 ETH (around $1,425,000) with 27 days left to mint.. In addition, PoolTogether is encouraging holders to spread the word by changing their profile pictures to the Pooly NFTs on Twitter.