Uniswap Labs is facing a potential enforcement action from the Securities and Exchange Commission (SEC). The regulator is considering taking legal action against the company behind the popular decentralized finance (DeFi) exchange Uniswap.
In a blog post published today (Wednesday), the company disclosed that it had been served a Wells notice by the SEC. A Wells notice is a letter issued by the regulator after concluding an investigation, indicating that it plans to pursue enforcement action against the recipient.
Uniswap Faces Scrutiny
Uniswap contends that its services are legal. The exchange has assured users that its services will remain available and continue to "ship new products." It argues that its platform fosters transparent and accessible financial markets, empowering users through self-custody and bypassing traditional intermediaries.
"If the SEC protects opaque systems and attacks new, transparent technology that can open up opportunity and reduce costs for Americans, the U.S. will fall behind on innovation that can power consumer choice and freedom," Uniswap wrote.
Uniswap believes the law is on its side. The exchange highlighted recent court decisions like SEC v. Ripple and their own legal victory in Risley v. Uniswap Labs, which suggest that the trading of digital assets on a secondary market doesn't qualify as securities trading.
Uniswap Fights Back
Additionally, Uniswap highlighted the decentralized nature of its platform, distancing itself from the legal definitions of securities exchanges or brokers.
Founded by Hayden Adams, Uniswap was launched in 2018 as an automated crypto exchange based on the Ethereum blockchain. According to CoinMarketCap, the DeFi platform is powered by a digital token dubbed UNI. This Ethereum-based digital asset has a market cap of more than $6 billion.
In March 2023, the SEC issued a similar Wells notice against Coinbase. In response, the crypto exchange criticized the regulator for lack of transparency, highlighting the ambiguity surrounding the alleged violations and the refusal to specify which assets on the platform could be deemed securities. Three months later, the regulator sued Coinbase for allegedly operating an illegal trading platform.
Similarly, the SEC filed multiple charges against Binance and its CEO, Changpeng Zhao, citing alleged illegal activities, including unregistered sales and commingling of funds. The regulator's accusations revolved around Binance's operation of unregistered trading platforms, Binance.com and Binance.US, and the sale of unregistered tokens BNB and BUSD.
