- Uniswap Labs challenges SEC’s expanded exchange definition post-Supreme Court decision affecting regulatory agency deference.
- SEC’s Wells Notice to Uniswap in April signals potential legal action for unregistered securities exchange operations.
Uniswap Labs recently called on the U.S. Securities and Exchange Commission (SEC) to reconsider its proposed rule changes to the Securities Exchange Act of 1934. These changes aim to expand the definition of “exchange,” a move Uniswap contends overreaches the SEC’s authority, particularly concerning decentralized finance (DeFi) platforms.
Today @Uniswap Labs urged the SEC not to proceed with its proposed rulemaking that would dramatically and improperly expand the definition of an ‘exchange’ to include DeFi and more. 1/x
— Katherine Minarik (@MinarikLaw) July 9, 2024
In April, the SEC issued a Wells Notice to Uniswap, indicating the agency’s intention to sue the company for operating as an unregistered securities exchange. Uniswap Labs has defended its operations, arguing that its protocol, which facilitates automated transactions between cryptocurrency tokens, does not meet the traditional criteria of an exchange and functions more as passive technology.
This legal contention stems from the Supreme Court’s recent ruling in Loper Bright Enterprises v. Raimondo, which alters how judicial deference to regulatory agencies, known as Chevron deference, is applied. Uniswap argues that without this deference, the SEC’s broad interpretation of the term “exchange” could be invalidated by the courts.
Both the SEC and the industry have better ways to spend their resources than in litigation over an unlawful rule. Our letter to the SEC is here: https://t.co/yAltMdmD3e. 3/3
— Katherine Minarik (@MinarikLaw) July 9, 2024
In response to these developments, Uniswap Labs has requested that the SEC reopen the public comment period on these proposed rule changes. The firm argues that the legal sector has shifted significantly enough to warrant a fresh round of commentary from stakeholders.
This call for additional public input underscores the firm’s stance that the rule changes, as currently proposed, could stifle innovation and lead to significant legal uncertainty within the DeFi sector.
Moreover, Uniswap points to previous court decisions that have shown hesitance to apply securities laws strictly to decentralized crypto services, such as in cases against Coinbase, Inc., and Binance Holdings. The company suggests that the SEC’s current approach of regulating through enforcement could lead to inconsistent legal outcomes.
Uniswap’s proactive stance highlights its commitment to legal compliance while advocating for fair regulatory measures that do not unduly hinder technological and financial innovation.
The company remains prepared to defend its position, even if it means taking its arguments to the Supreme Court, underscoring its dedication to both its business model and the broader DeFi ecosystem.
