The CFTC charged Uniswap with offering “illegal” leveraged tokens.
Two CFTC Commissioners, Caroline Pham and Summer Mersinger, expressed their dissent against the regulatory order.
The US Commodity Futures Trading Commission charged decentralized exchange (DEX) developer Uniswap Labs with offering illegal leveraged and margined commodities transactions. The two parties simultaneously settled the charges with a payment of $175,000.
Meanwhile, CFTC's Commissioner, Caroline Pham, dissented from the order, pointing out that the existing rules do not specify characteristics of “leveraged tokens.” She also expressed concern over the regulator's “ever-expanding jurisdictional overreach.”
Leveraged Tokens Are Illegal on Unregistered Platforms
According to Wednesday's announcement, the regulatory action also includes a cease-and-desist order to prevent Uniswap from further violating the Commodity Exchange Act.
The regulator highlighted that Uniswap developed a protocol and interface allowing “Non-Eligible Contract Participants” and institutional users in the United States and abroad to trade digital assets through the Ethereum blockchain. The protocol allowed users to create and trade with hundreds of liquidity pools, consisting of matched pairs of digital assets valued against each other. It also included a limited number of leveraged tokens, which provided leveraged exposure to digital assets like Bitcoin and Ethereum.
The CFTC finds these leveraged tokens to be leveraged or margined commodity transactions that did not result in actual delivery within 28 days. Thus, they can only be offered to “Non-Eligible Contract Participants” on a board of trade designated or registered by the CFTC as a contract market. However, Uniswap is not a CFTC-registered contract market.
“Today's action demonstrates once again that the Division of Enforcement will vigorously enforce the CEA as digital asset platforms and DeFi ecosystems evolve,” said the CFTC's Director of Enforcement, Ian McGinley. “DeFi operators must be vigilant to ensure that transactions comply with the law.”
Two Dissenting Voices
However, two CFTC Commissioners, Caroline Pham and Summer Mersinger, dissented against the regulator's order concerning the decentralized exchange protocol. Notably, both are aligned with the Republican political party. There are five CFTC Commissioners, including the Chair, of whom a majority of three align with the Democratic Party.
“There is no evidence in the administrative record that describes the specific terms and/or characteristics of the 'Leveraged Tokens' as characterized in the settlement order,” Commissioner Pham wrote in her dissent. “I am concerned that the Commission's ever-expanding jurisdictional overreach continues to perpetuate a lack of regulatory clarity, not only regarding digital assets, but more significantly, for our cash commodity markets.”
“Given that the CEA and CFTC rules were written for traditional, centralized market infrastructure providers and intermediaries,” noted Commissioner Mersinger, “it was my hope that one day soon the Commission would consider rulemaking, or at the very least guidance, making clear how DeFi protocols could comply with them.”
The US Commodity Futures Trading Commission charged decentralized exchange (DEX) developer Uniswap Labs with offering illegal leveraged and margined commodities transactions. The two parties simultaneously settled the charges with a payment of $175,000.
Meanwhile, CFTC's Commissioner, Caroline Pham, dissented from the order, pointing out that the existing rules do not specify characteristics of “leveraged tokens.” She also expressed concern over the regulator's “ever-expanding jurisdictional overreach.”
Leveraged Tokens Are Illegal on Unregistered Platforms
According to Wednesday's announcement, the regulatory action also includes a cease-and-desist order to prevent Uniswap from further violating the Commodity Exchange Act.
The regulator highlighted that Uniswap developed a protocol and interface allowing “Non-Eligible Contract Participants” and institutional users in the United States and abroad to trade digital assets through the Ethereum blockchain. The protocol allowed users to create and trade with hundreds of liquidity pools, consisting of matched pairs of digital assets valued against each other. It also included a limited number of leveraged tokens, which provided leveraged exposure to digital assets like Bitcoin and Ethereum.
The CFTC finds these leveraged tokens to be leveraged or margined commodity transactions that did not result in actual delivery within 28 days. Thus, they can only be offered to “Non-Eligible Contract Participants” on a board of trade designated or registered by the CFTC as a contract market. However, Uniswap is not a CFTC-registered contract market.
“Today's action demonstrates once again that the Division of Enforcement will vigorously enforce the CEA as digital asset platforms and DeFi ecosystems evolve,” said the CFTC's Director of Enforcement, Ian McGinley. “DeFi operators must be vigilant to ensure that transactions comply with the law.”
Two Dissenting Voices
However, two CFTC Commissioners, Caroline Pham and Summer Mersinger, dissented against the regulator's order concerning the decentralized exchange protocol. Notably, both are aligned with the Republican political party. There are five CFTC Commissioners, including the Chair, of whom a majority of three align with the Democratic Party.
“There is no evidence in the administrative record that describes the specific terms and/or characteristics of the 'Leveraged Tokens' as characterized in the settlement order,” Commissioner Pham wrote in her dissent. “I am concerned that the Commission's ever-expanding jurisdictional overreach continues to perpetuate a lack of regulatory clarity, not only regarding digital assets, but more significantly, for our cash commodity markets.”
“Given that the CEA and CFTC rules were written for traditional, centralized market infrastructure providers and intermediaries,” noted Commissioner Mersinger, “it was my hope that one day soon the Commission would consider rulemaking, or at the very least guidance, making clear how DeFi protocols could comply with them.”
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
SEC Reiterates Binance’s Illegal Operations, Highlights “Lack of Disclosure”
Transformation in the APAC Trading Landscape and Beyond | FMPS:24
Transformation in the APAC Trading Landscape and Beyond | FMPS:24
As the financial services industry experiences rapid and transformative changes, leading fintech experts and policymakers come together to discuss the present and future of retail trading and the evolving regulatory landscape. Join this insightful session for a forward-looking perspective on the trends, innovations, and trader needs that are shaping the future of offerings on a global scale.
Speakers:
Eric Blewitt, CEO, Investment Trends
Rhys Bollen, Senior Executive Leader, Digital Assets, Australian Securities and Investments Commission (ASIC)
Michael Bogoevski, Head of Institutional Sales, CMC Connect
Karin Setchell, General Manager, Product & Investing Solutions, CommSec
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As the financial services industry experiences rapid and transformative changes, leading fintech experts and policymakers come together to discuss the present and future of retail trading and the evolving regulatory landscape. Join this insightful session for a forward-looking perspective on the trends, innovations, and trader needs that are shaping the future of offerings on a global scale.
Speakers:
Eric Blewitt, CEO, Investment Trends
Rhys Bollen, Senior Executive Leader, Digital Assets, Australian Securities and Investments Commission (ASIC)
Michael Bogoevski, Head of Institutional Sales, CMC Connect
Karin Setchell, General Manager, Product & Investing Solutions, CommSec
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Executive Interviews with Joe Li & Simon Naish | ATFX | FMPS:24
Executive Interviews with Joe Li & Simon Naish | ATFX | FMPS:24
In this Finance Magnates Executive Interview, Joe Li, Chairman at ATFX and Simon Naish, Country Head of Australia at ATFX Connect, discuss ATFX’s strategic growth in the APAC region, particularly focusing on their institutional arm, ATFX Connect. They highlight the importance of Australia as a strategic hub, the challenges of operating in a highly competitive and regulated market, and their plans for regional expansion across APAC. The conversation touches on the integration of advanced technology and multi-asset offerings, the significance of optimal execution tools, and the importance of tailoring solutions to meet the sophisticated demands of institutional clients. They also emphasize their strong regulatory compliance and their commitment to enhancing client experience through innovative tools and infrastructure.
#fmps #fmps24 #fmevents #ATFXConnect #APACFinance #InstitutionalTrading #FinancialTechnology #MarketExpansion
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In this Finance Magnates Executive Interview, Joe Li, Chairman at ATFX and Simon Naish, Country Head of Australia at ATFX Connect, discuss ATFX’s strategic growth in the APAC region, particularly focusing on their institutional arm, ATFX Connect. They highlight the importance of Australia as a strategic hub, the challenges of operating in a highly competitive and regulated market, and their plans for regional expansion across APAC. The conversation touches on the integration of advanced technology and multi-asset offerings, the significance of optimal execution tools, and the importance of tailoring solutions to meet the sophisticated demands of institutional clients. They also emphasize their strong regulatory compliance and their commitment to enhancing client experience through innovative tools and infrastructure.
#fmps #fmps24 #fmevents #ATFXConnect #APACFinance #InstitutionalTrading #FinancialTechnology #MarketExpansion
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Ready to Scale? Regtech in Australia, A Global View | FMPS:24
Ready to Scale? Regtech in Australia, A Global View | FMPS:24
In the effort to elevate Australian fintech on the global stage, RegTech presents a unique and compelling case. Despite the increasing demand for robust compliance solutions, Australia's RegTech sector—ranked third-largest globally—remains underfunded. Join this insightful fireside chat to explore the future of Australia’s RegTech hub and its global potential.
Key discussion points include uncovering the hidden opportunities in RegTech that VCs are overlooking, the necessary steps for increased governmental support, the readiness of the local ecosystem to collaborate across global regulatory regimes, and lessons learned from other leading fintech hubs around the world.
Speakers:
Dickie Currer, National Lead, Tech Australia Advocates
Deborah Young, CEO, The RegTech Association
#fmps #fmps24 #fmevents #RegTech #Fintech #AustralianFintech #GlobalCompliance #TechInnovation
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In the effort to elevate Australian fintech on the global stage, RegTech presents a unique and compelling case. Despite the increasing demand for robust compliance solutions, Australia's RegTech sector—ranked third-largest globally—remains underfunded. Join this insightful fireside chat to explore the future of Australia’s RegTech hub and its global potential.
Key discussion points include uncovering the hidden opportunities in RegTech that VCs are overlooking, the necessary steps for increased governmental support, the readiness of the local ecosystem to collaborate across global regulatory regimes, and lessons learned from other leading fintech hubs around the world.
Speakers:
Dickie Currer, National Lead, Tech Australia Advocates
Deborah Young, CEO, The RegTech Association
#fmps #fmps24 #fmevents #RegTech #Fintech #AustralianFintech #GlobalCompliance #TechInnovation
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Resilience in Trading: From Third Class To World Class | FMPS:24
Resilience in Trading: From Third Class To World Class | FMPS:24
Join Mario Singh, Founder and Chairman of Fullerton Markets, as he shares his life story, highlighting the traits that were required starting without financial knowledge to become a financial and trading expert recognised by world-renowned media like CNBC & Bloomberg.
#fmps #fmps24 #fmevents #trading #onlinetrading #tradingexpert #tradingjourney
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Join Mario Singh, Founder and Chairman of Fullerton Markets, as he shares his life story, highlighting the traits that were required starting without financial knowledge to become a financial and trading expert recognised by world-renowned media like CNBC & Bloomberg.
#fmps #fmps24 #fmevents #trading #onlinetrading #tradingexpert #tradingjourney
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IBs and Brokers: The Good, The Bad, The Ugly | FMPS:24
IBs and Brokers: The Good, The Bad, The Ugly | FMPS:24
For most brokers, IBs and trading educators are invaluable partners, driving highly targeted traffic from key regions. However, without proper management, these relationships can quickly turn sour. In this session, gain an insider’s perspective on the types of licenses IBs need in APAC, the crucial details in IB agreements that both parties must scrutinize, common disputes between IBs and brokers and effective resolutions, and the pros and cons of transitioning from IB to broker.
Speakers:
Melody Gao, Senior Lawyer, Sophie Grace
James Perry-Keene, Head of Strategic Partnerships, Pepperstone
Christopher Balanzategui, CEO, N3tworx
#fmps #fmps24 #fmevents #IBAgreements #BrokerPartnerships #TradingIndustry #APACFinance #FinancialRegulation
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For most brokers, IBs and trading educators are invaluable partners, driving highly targeted traffic from key regions. However, without proper management, these relationships can quickly turn sour. In this session, gain an insider’s perspective on the types of licenses IBs need in APAC, the crucial details in IB agreements that both parties must scrutinize, common disputes between IBs and brokers and effective resolutions, and the pros and cons of transitioning from IB to broker.
Speakers:
Melody Gao, Senior Lawyer, Sophie Grace
James Perry-Keene, Head of Strategic Partnerships, Pepperstone
Christopher Balanzategui, CEO, N3tworx
#fmps #fmps24 #fmevents #IBAgreements #BrokerPartnerships #TradingIndustry #APACFinance #FinancialRegulation
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