Uniswap Labs recently filed a detailed 40-page response to the SEC’s Wells Notice, disputing potential legal action and urging the agency to drop the matter. The SEC had raised concerns that Uniswap’s operations might violate US securities laws, claiming that Uniswap Protocol operates as an unregistered securities exchange under Uniswap Labs’ control. Uniswap serves the decentralized finance (DeFi) space, catering to developers, traders, and liquidity providers. The SEC also labeled the Uniswap interface as an unregistered securities broker-dealer and the UNI token as an investment contract.
In response, Uniswap argued that the SEC’s legal assertions are weak and have been contradicted by court rulings. The crypto marketplace stated that the agency is stretching the definitions of securities, exchanges, and contracts to an unreasonable point. Uniswap expressed confidence that their work is on the right side of history and urged the SEC not to waste taxpayer-funded resources pursuing a case against them. The marketplace emphasized that the SEC’s accusations are based on the notion that any value stored in a digital format can be considered a security.
Uniswap further argued that most trading on its platform does not involve securities, even by the SEC’s own standards. The marketplace highlighted that a significant portion (65%) of its trading volume involves assets that the SEC has acknowledged are not securities, such as Ether, wrapped Bitcoin, and stablecoins. Additionally, Uniswap claimed that US securities laws would not apply to most of its users, as it estimates 75% of them are located outside the US. Even if a few security-like transactions occur on the platform, Uniswap maintained that it is not a securities exchange since it was not specifically designed for those transactions.
The SEC has been actively sending Wells notices, filing lawsuits, and reaching settlements with multiple crypto companies. The regulatory focus is shifting towards Ethereum and DeFi players, with ShapeShift, TradeStation, Uniswap, ConsenSys, and reportedly, the Ethereum Foundation facing legal actions. The aggressive stance of the SEC has led to increased scrutiny of crypto activities, particularly in the DeFi sector. Uniswap’s response to the SEC’s Wells Notice reflects a broader trend of regulatory challenges facing decentralized finance platforms and highlights the ongoing regulatory uncertainties in the crypto industry.
