Regulation
Uniswap Labs criticizes the SEC’s misguided attempts to regulate DeFi
Uniswap Labs issued a defiant response to the SEC’s Wells notification, saying the agency’s attempts to regulate DeFi are misguided and legally unsound.
The company said this in a May 20 statement blog post who is confident that he will emerge victorious if forced to initiate litigation by the SEC. Uniswap Labs said:
“We are confident that our work is on the right side of history. The SEC should not devote its taxpayer-funded resources to pursuing litigation against us.”
The answer comes amid a broader clash over the future of financial technology and market regulation.
Legally unfounded
Uniswap Labs has criticized the SEC’s efforts to expand its jurisdiction over communications technology and digital markets, arguing that the agency’s legal arguments are weak and have been repeatedly refuted in court.
The company said:
“We believe the SEC should embrace open source technology that improves outdated business and financial systems instead of attempting to make them disappear through litigation.”
He also highlighted that the Uniswap protocol is in line with the SEC’s mission to protect investors and maintain fair, orderly and efficient markets.
Uniswap Labs defended Uniswap DEX as an important 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 trading volume without a single hack – offers transparent, low-cost and efficient trading accessible globally 24/7 .
Similar to a PDF file
In its full Wells response, Uniswap Labs rejected the SEC’s claims that the protocol is an unregistered exchange and that the UNI token constitutes an investment contract.
He argued that the supported ERC-20 token standard is a “general file format for all forms of value.”
The company stated:
“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 occur 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 that its interface acts as an unregistered broker-dealer.
However, Uniswap Labs argues that the SEC’s position is based on incorrect assumptions and argues that these statements falsely equate a digital file format to a security.
The company claimed that the UNI token was distributed to thousands of users without any expectation of profit from the performance of the DEX, implying that it does not meet the criteria required by the Howey Test.
Uniswap confident in victory
Marvin Ammori, CLO of Uniswap Labs, expressed confidence in Uniswap’s position, stating about X:
“We have a very strong case. If we are forced to fight, we will win.”
He said Uniswap Labs’ case is “so strong that the SEC is trying to change the law.” In addition to describing the topic of file formats, Amorri said the SEC is working to redefine the term “exchange” and other terms beyond their current meaning.
He said courts have rejected similar arguments against it CoinBase finding that self-custodial portfolios do not meet the requirements to be a broker.
Uniswap Labs has hired lawyers who have won two high-profile cases, including former SEC enforcement chief Andrew Ceresney and former US Attorney General Don Verrilli.
The two lawyers represented Ripple AND Greyscale against the SEC respectively.
The SEC issued a Wells Notice to Uniswap Labs on April 10th which indicated that the SEC’s Enforcement Division intended to recommend legal action against the company.
In recent weeks, the SEC has also filed notices against Wells Ethereum development company Consensys and the retail brokerage Robinhood.
The SEC has not yet initiated expected legal action against the three companies. Only Consensys responded with a preemptive lawsuit.