Regulation
Uniswap Labs Slams SEC’s Misguided Attempts to Regulate DeFi
Uniswap Labs issued a provocative response to the SEC’s Wells opinion, arguing that the agency’s attempts to regulate DeFi are misguided and legally unsound.
The company said in a May 20 statement blog post that he is confident he will emerge victorious if forced into litigation by the SEC. Uniswap Labs said:
“We are convinced that our work is on the right side of history. The SEC should not be devoting its taxpayer-funded resources to bringing charges against us.
This response comes amid a broader conflict over the future of financial technology and market regulation.
Legally unsatisfactory
Uniswap Labs has criticized the SEC’s efforts to expand its jurisdiction over communications technologies and digital markets, saying the agency’s legal arguments are weak and have been repeatedly rebutted in court.
The company said:
“We believe the SEC should embrace open source technology that improves outdated business and financial systems instead of trying to make it disappear.”
He also emphasized that the Uniswap protocol aligns with the SEC’s mission to protect investors and maintain fair, orderly and efficient markets.
Uniswap Labs championed the Uniswap DEX as a major market innovation that allowed users to transact directly without relying on centralized intermediaries. He added that the protocol – which operates autonomously and has facilitated $2 trillion in transaction volume without a single hack – offers transparent, low-cost and efficient trading, accessible globally 24/7 /7.
Similar to a PDF file
In its full response from Wells, Uniswap Labs rejected the SEC’s claims that the protocol is an unregistered securities exchange and that the UNI token constitutes an investment contract.
It argued that the ERC-20 token standard it supports is a “general file format for all forms of value.”
The company said:
“A token is a file format, like a PDF. The protocol is a general-purpose computer program that anyone can use and integrate, like TCP/IP.
Uniswap Labs added that while the SEC is correct that some securities transactions take place on its protocol, the protocol is “almost exclusively used for non-securities transactions” involving Ethereum, wrapped Bitcoin, stablecoins and memecoins.
The SEC argued that Uniswap is an exchange controlled by Uniswap Labs and its interface acts as an unregistered broker.
However, Uniswap Labs argues that the SEC’s position is based on incorrect assumptions and asserts that these assertions wrongly equate a digital file format with a security.
The company said the UNI token was distributed to thousands of users without expecting profit from the performance of the DEX, implying that it does not meet the criteria required by the Howey test.
Uniswap confident in victory
Uniswap Labs CLO Marvin Ammori expressed confidence in Uniswap’s position, indicating on:
“We have a very strong case. If we are forced to litigate, we will win.
He claimed that Uniswap Labs’ arguments are “so strong that the SEC is trying to change the law.” In addition to describing the file formats argument, Amorri said the SEC is working to redefine “exchange” and other terms beyond their current meaning.
He said courts have rejected similar arguments against Coinbase finding that self-custodial wallets do not meet the requirements to be a broker.
Uniswap Labs has hired lawyers who won two high-profile cases, including former SEC enforcement official Andrew Ceresney and former U.S. Solicitor General Don Verrilli.
The two lawyers represented Ripple And Shades of grey against the SEC, respectively.
The SEC issued a Wells Notice to Uniswap Labs on April 10 which indicated that the SEC’s Enforcement Division intended to recommend legal action against the company.
In recent weeks, the SEC has also filed Wells notices against the Ethereum development company Consensys and the Robinhood retail brokerage.
The SEC has not yet filed expected charges against the three companies. Consensys alone responded with preventive legal action.