The Securities and Exchange Commission warned Uniswap on Wednesday that it intends to bring enforcement action against the leading DeFi platform. DeFi is a part of the cryptocurrency market where traders rely on computer protocols that act as automated market makers to make various trades. token.
The warning comes in the form of a so-called Wells Notice, which the SEC sends to companies before filing a formal lawsuit, giving them one last chance to refute the allegations. In this case, authorities have been investigating Uniswap for some time, and the process could prove to be nothing more than a formality, as it is reportedly in the midst of a sweeping crackdown on the crypto industry. is high.
When asked for comment, an SEC spokesperson said, “The SEC does not comment on potential investigations.”
luck The specific nature of the SEC's allegations against Uniswap Labs is not yet known. Uniswap Labs is the company that built but does not control the protocol of the same name. However, based on the agency's recent lawsuits against high-profile crypto companies like Coinbase, the agency alleges that the company illegally offered unregistered securities to the public or failed to register as a broker or exchange. Probability is high.
The impending Uniswap lawsuit raises concerns that the crypto industry is accusing the SEC of acting in bad faith with respect to the crypto sector and failing to account for blockchain-based technology that is unique to cryptocurrencies despite clear rules. It comes amid loud complaints that enforcement action is being pursued regardless. SEC Chairman Gary Gensler countered that existing securities laws are clear and that the cryptocurrency sector demands special treatment despite its non-compliance. That position is echoed by the White House, especially Democratic Sen. Elizabeth Warren, a strong ally of Mr. Gensler. -mass. ).
The conflict between the SEC and the crypto industry has already resulted in a number of high-profile lawsuits, most of them involving Coinbase and Ripple, and the SEC's jurisdiction over digital assets and the definition of securities in 1946. This question calls into question the nature of the Supreme Court's ruling in 2017. Applies to cryptography.
While these ongoing cases have produced a variety of outcomes that allow both sides to assert superiority, the latest rulings suggest that legal momentum is with the SEC. However, the outcome of the Uniswap lawsuit is particularly unpredictable given the unique nature of DeFi technology and the company's notable legal victory in a class action lawsuit last year.
Given the rapid growth of DeFi, which was once a small niche in the crypto market, a lawsuit between the SEC and Uniswap Labs would raise the stakes. Uniswap recently announced that the protocol has facilitated over $2 trillion in transactions, and there is growing interest from mainstream finance in the potential of the underlying technology.
DeFi platforms as self-driving cars
Unlike traditional intermediaries and crypto exchanges, DeFi platforms have no central authority acting as a counterparty to transactions or intervening between buyers and sellers. Instead, they rely on automated protocols overseen solely by code that sets rules such as trading and collateral requirements.
In the case of Uniswap Labs, founder Hayden Adams wrote the original underlying code that powers the protocol, and the company provides an interface for users to trade specific crypto tokens. However, the protocol itself is open source and used by many other projects in the DeFi world.
This distinction was important in resolving a class action lawsuit filed against Uniswap Labs last year that held Uniswap Labs responsible for defrauded traders. In that case, the plaintiffs alleged that Adams had built what amounted to a dangerous, out-of-control self-driving car.
Uniswap Labs also took up the self-driving car analogy, but argued that the technology it built is neutral and that individuals cannot control whether it is used for bad or good. In a sophisticated ruling that details the nuances of DeFi, a federal judge fully sided with Uniswap Labs, delivering a major victory for the DeFi sector.
More recently, in last month's ruling in the SEC's case against Coinbase, the judge declined to dismiss claims that the company was offering illegal securities, but Coinbase's decentralized wallet offering is considered a broker under the SEC's authority. The court ruled that it was not considered. This discovery will likely boost Uniswap Labs' case in any litigation with the SEC, but it does not describe the company's interfaces that it controls and has in the past used tokens that the SEC later deemed securities. Sometimes it has been highlighted.
A source close to Uniswap Labs said: luck The company said it was prepared to put up a “worthy fight” in court and that its legitimacy was reflected in the fact that it chose to operate in broad daylight in New York City rather than overseas.
