SEC Issues Enforcement Notice to DeFi Exchange Uniswap

Uniswap, a decentralised cryptocurrency exchange (DEX), disclosed that it had received a notice from the United States (US) Securities and Exchange Commission (SEC) indicating its intention to pursue an enforcement action.

Uniswap CEO Hayden Adams expressed his reaction on X (previously known as Twitter), stating that while not surprised, he felt "just annoyed, disappointed, and ready to fight."

Wells notices serve as preliminary warnings, outlining potential charges the regulator may bring against the recipient, often leading to enforcement actions.

During a press conference, Uniswap's COO Mary-Catherine Lader and Chief Legal Officer Marvin Ammori elaborated on the Wells notice, focusing on allegations of Uniswap acting as an unregistered securities broker and exchange.

Marvin expressed his belief that Uniswap does not align with the SEC's current definition of an exchange.

He referenced a recent ruling in the SEC's case against Coinbase, where a judge determined that Coinbase Wallet did not qualify as a broker.

This precedent suggests a favourable outlook for Uniswap's defense against similar charges, especially given that the judge allowed other allegations by the SEC against Coinbase to proceed.

Hayden affirmed Uniswap's intent to contest the charges, stating that the SEC's actions reflect a broader political agenda.

He expressed confidence:

"I am confident that the products we offer are legal and that our work is on the right side of history. But it’s been clear for a while that rather than working to create clear, informed rules, the SEC has decided to focus on attacking long-time good actors like Uniswap and Coinbase. All while letting bad actors like FTX slip by. I'm frustrated that the SEC seems to be more concerned with protecting opaque systems than protecting consumers. And that we'll have to fight a US government agency to protect our company and our industry. This fight will take years, may go all the way to the Supreme Court, and the future of financial technology and our industry hangs in the balance. If we stand together we can win. I think freedom is worth fighting for. I think DeFi is worth fighting for.”

In a recent blog post https://blog.uniswap.org/fighting-for-defi, Uniswap addressed the Wells notice it received from the SEC, alongside the agency's legal actions against Coinbase and other crypto entities.

The post suggests that these moves represent a broader political agenda aimed at targeting innovative blockchain technologies, even those operated by reputable actors.

The post stated that:

"The reality is that tokens are a digital file format, like a pdf or spreadsheet, and can store many kinds of value. They are not intrinsically securities, just as every sheet of paper is not a stock certificate. The overwhelming volume of traded tokens are definitively not securities – they are stablecoins, community and utility tokens, and commodities like Ethereum and Bitcoin."

Despite the SEC's stance that most tokens, excluding bitcoin, are considered securities, Uniswap maintains that the tokens it offers do not fall under this classification.

The company criticised the SEC for its perceived reluctance to establish a clear path for token registration, arguing that such ambiguity hinders innovation.

Additionally, Uniswap questioned the SEC's authority over the crypto market, citing statements from SEC Chairman Gary Gensler regarding the need for congressional action to grant the agency sufficient regulatory powers.

While Gary has argued that existing securities laws are adequate for overseeing crypto, Uniswap remains sceptical of the SEC's jurisdiction in this domain.