Uniswap Labs Challenges SEC’s Allegations Regarding Crypto Tokens
Uniswap Labs, the company behind one of the largest decentralized trading platforms, is disputing the potential enforcement action by the US Securities and Exchange Commission (SEC). They argue that crypto tokens should not be considered securities. The firm is pushing back against allegations of operating as an unregistered exchange and broker-dealer from the SEC, following the issuance of a Wells Notice indicating impending legal action against them.
The Dispute Over Token Classification
Uniswap Labs has filed a 40-page response to the SEC, outlining why the agency should reconsider its decision to pursue legal action. The SEC’s claims are based on the assumption that all tokens are securities, a notion that Uniswap Labs strongly disagrees with.
- Chief Legal Officer Marvin Ammori emphasized that tokens are essentially a file format for value and should not be automatically deemed securities.
- He criticized the SEC’s attempt to broaden the definitions of terms such as “exchange,” “broker,” and “investment contract” to encompass Uniswap’s operations.
SEC’s Heightened Scrutiny on Crypto Firms
Throughout this year, the SEC has ramped up its actions against various crypto companies, utilizing Wells notices, lawsuits, and settlements. The commission’s focus has notably increased on Ethereum and decentralized finance (DeFi) players, including Uniswap, ShapeShift, TradeStation, and Consensys. Reports also suggest that the Ethereum Foundation is under investigation.
Battle for DeFi Continues
Uniswap Labs firmly believes that the SEC’s case against them is fundamentally flawed, primarily due to the failure to differentiate between tokens functioning as value files and tokens categorized as securities. If the SEC proceeds with a lawsuit alleging Uniswap Labs’ operation as an unregistered exchange, it risks undermining its authority over crypto tokens.
- The company cautioned that such legal action could set a precedent that might hinder the SEC’s ongoing regulatory efforts.
- Uniswap Labs expressed readiness to take the matter to court if required and exuded confidence in a positive outcome based on their legal representation’s track record in high-profile SEC cases.
Contesting the Howey Test
SEC Chairman Gary Gensler has been vocal about his stance that decentralized exchanges are not truly decentralized and should be within the regulator’s oversight. Gensler argues that many digital assets could be unregistered securities under SEC purview. In response, Uniswap Labs refuted the SEC’s classification of their UNI governance token as well as LP tokens, used in Uniswap pools for providing liquidity.
- UNI token has experienced a notable increase of nearly 20% in the last 24 hours amid a market recovery after a two-month consolidation period, trading at $9.34.
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