Decentralized finance startup PoolTogether is in legal trouble and turning to non-fungible tokens (NFTs) to crowdfund its defense fund.
Funds from the company's "Pooly" NFT collection released Thursday will go toward "helping PoolTogether Inc. defend itself against the class action lawsuit," according to the company's website.
PoolTogether is an app-based, no-loss savings game that allows users to win prizes for depositing funds into the platform using DeFi protocols on the back end.
The lawsuit in question dates back to last October, when Joe Kent - a former staffer for notoriously anti-crypto Senator Elizabeth Warren (D-Mass.) - sued PoolTogether for violating New York state gambling laws.
Kent's lawsuit also describes him as "gravely concerned that the cryptocurrency ecosystem - which requires the use of enormous amounts of electricity - is accelerating climate change and enabling people to evade financial regulations and defraud consumers" - concerns that echo those espoused by his former boss, Senator Warren.
Kent's lawsuit against PoolTogether is seen as a test case for a change in DeFi regulation because the plaintiff had only deposited $10 on the platform before filing the suit.
Kent's lawsuit names PoolTogether, the Brooklyn-based company, and its founder, Brooklyn resident Leighton Cusak, as defendants, as well as a number of investors in the protocol, including Dragonfly Capital, Compound Labs and Galaxy Digital Capital Management. Individual investors in the project, including Stanislav Kulechov, the founder and CEO of Aave, are also named.
By naming both the company and its investors, Kent's lawsuit seeks to clarify who is legally responsible when a DeFi protocol "harms" a user. Depending on the outcome of the case, this could have huge implications for decentralized projects - including decentralized exchanges and decentralized autonomous organizations (DAOs) - as a whole.
The crypto community has rallied around PoolTogether and its founder, Leighton Cusak, who announced the Pooly drop on Twitter on Thursday. Within two hours of launch, the collection had raised 73 ETH (about $135,000), with a goal set at 769 ETH (about $1,425,000) with 27 days left to mint.
The NFTs are available in three editions for 0.1 ETH, 1 ETH and 75 ETH each. PoolTogether encourages owners to spread the word by changing their profile pictures on Twitter to Pooly NFTs.