The United States Securities and Exchange Commission (SEC) is taking on another sector of the crypto industry, this time targeting one of the largest players in decentralized finance (DeFi).
On Wednesday, the regulator issued a Wells notice against Uniswap Labs, the company behind the world's largest decentralized exchange (DEX).
Uniswap to be sued by SEC
Uniswap Labs publicly confirmed the news in a Press release Wednesday, and assured fans that the team was “ready to fight.”
“This is the latest political effort to target even top crypto players like Uniswap and Coinbase,” the team said, referring to the SEC's June 2023 lawsuit against the largest centralized crypto exchange in the country.
“All Uniswap products and the Uniswap protocol are unaffected,” they added.
Uniswap Labs is a New York-based software company that is the primary contributor and developer of the Uniswap protocol on Ethereum.
The protocol allows users to access crypto trading and liquidity tokens in a permissionless, trustless, global and decentralized manner compared to traditional competitors.
Although Uniswap Labs did not specify what the SEC plans to litigate, the agency's history provides clear clues. Last year, it sued numerous exchanges, including Binance, Coinbase and Kraken, for illegally listing several alleged securities.
It has also sued numerous project teams like Ripple, Terraform Labs and others for issuing unregistered securities as crypto tokens.
Uniswap Labs could plausibly be considered guilty of both activities. Not only does its protocol allow thousands of tokens to be exchanged, but it also features its own native token, UNI, which gives holders a share of the protocol's revenue and voting power around its development proposals.
Legal defense of Uniswap
Uniswap argued that “massively traded” assets on its protocol do not constitute securities, citing the court’s ruling in the SEC v. Ripple case. This includes the UNI token itself, which he says does not pass the Howey test because it does not involve investment in a joint venture.
“Even if the Ripple decision and the Supreme Court's Howey test did not preclude the SEC's arguments, the Uniswap protocol, web application, and wallet would still not meet the legal definitions of a securities exchange or 'a broker,' the company added.
As a decentralized exchange, the company claimed that current law does not give the SEC jurisdiction over self-custodial on-chain trading decisions.
“The Uniswap technology ecosystem is sufficiently decentralized, just like Bitcoin and Ethereum,” concluded Uniswap Labs. “We are confident that our products are on the right side of the law. »
2024 LIMITED OFFER for CryptoPotato readers at Bybit: Use this link to sign up and open a $500 BTC-USDT position on Bybit Exchange for free!