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  • L Higgins and M Bacina

Uniswap seeks to skewer the SEC on Wells Notice

Updated: May 30

The clash between Uniswap Labs and the US Securities and Exchange Commission (SEC) continues for the future of financial innovation. In a recent blog post entitled "The fight for DeFi continues", Uniswap Labs has again responded to the Wells Notice that was issued against them by the SEC in April of this year, advocating for the recognition and support of open source technologies that aim to enhance traditional financial systems, rather than disrupt. The blog post was accompanied by a link to Uniswap's formal submission to the Wells Notice.

Uniswap Labs argues that the SEC should embrace technologies like the Uniswap Protocol, which offer a secure, low-cost, and transparent infrastructure. These qualities align closely with the SEC’s own mission to protect investors and maintain fair, orderly, and efficient markets:

The Uniswap protocol is secure, low cost, transparent infrastructure that "protects investors and maintains fair, orderly, and efficient markets." Ironically, that's the SEC's mission.

The post argues that the SEC’s current approach seems to extend its regulatory reach beyond traditional exchanges, targeting communication technologies and various market types. Uniswap argues that this expansion is an overreach, stating that some of the SEC's legal arguments have already been refuted in court. Unfortunately, no explicit case or proceeding is referenced by the SEC.

Coinbase's challenge to the SEC's enforcement powers over cryptoassets under the so-called "major questions" doctrine was rebuffed in an interlocutory judgment earlier this year. Interestingly, however, the FIT 21 bill has passed the House in the US and aims to grant the Commodity Futures Trading Commission (CFTC) robust authority over digital asset trading, indicating a potential shift in regulatory oversight that may curb the SEC’s expansive ambitions.

Uniswap contend that their protocol represents a paradigm shift in how markets operate by allowing users to transact directly with one another without relying on centralised intermediaries (a core pillar of the thesis statement for blockchain technology). Decentralised models eliminate the need for middlemen, who often impose fees and hold users' assets, leading to higher costs and potential security risks. Uniswap argues that many traditional markets are inefficient or not transparent, operating on a limited basis (i.e., 9-5 hours on weekdays as opposed to 24/7).

Regarding the SEC's assertion that the Uniswap Protocol is an unregistered securities exchange controlled by Uniswap Labs (amongst other similar assertions), Uniswap contends that:

"[t]hese assertions assume that value represented in a specific digital file format is a security - and that the SEC can unilaterally extend the definitions of exchanges, brokers and contracts to the point of meaninglessness."

Uniswap likens crypto-assets and tokens to file formats akin to PDFs, with the Uniswap Protocol operating like a general-purpose internet protocol. Uniswap further contends that the distribution of UNI tokens to early adopters and testers of the Protocol involved no contracts or profit expectations based solely on Uniswap’s efforts, undermining the SEC’s assertion of these tokens as securities.

Uniswap remains steadfast against contrary claims to the legitimacy of its operations and is prepared to defend its approach. Uniswap argues that the SEC should not expend taxpayer resources on litigating against technological advancements that challenge and improve outdated systems. Uniswap’s legal team, with a proven track record against the SEC in the Ripple and Grayscale cases, is ready for the fight.

Despite the looming legal battle, Uniswap is undeterred in its mission to innovate, which has proven inspiring for blockchain enthusiasts and industry members alike with many taking to social media to express their support:

This is not to say that Uniswap's approach has not been met with some healthy criticisms. In response to the founders' posts on X announcing their reply to the Wells Notice and the blog post, many expressed their concerns with some of Uniswap's arguments:

The unfolding conflict between Uniswap Labs and the SEC represents a critical juncture in financial regulation. Embracing blockchain technology and open source innovation can lead to more robust and equitable financial systems. It is imperative for regulators to support these advancements rather than stifle them through litigation. This case will not only shape the future of Uniswap, but also the broader landscape of financial technology.

By L Higgins, S Pettigrove and M Bacina


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