DeFi
SEC Lawsuit Against Uniswap Is Opening Attack on DeFi
Uniswap Labs, the Brooklyn-based company primarily responsible for developing the protocol of the same name, reportedly received a Wells notice that the U.S. Securities and Exchange Commission intends to sue. While the decentralized finance (DeFi) giant declared itself “ready to fight” the SEC, indicating its willingness to go to court, the move represents the latest front in the SEC’s years-long battle with the crypto industry.
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And to some extent, this is entirely predictable. Before that, the SEC filed suit against US exchanges Coinbase and Kraken. In fact, the reason the industry is so familiar with the term “Wells Notice” is because Coinbase received one in the months before the SEC lawsuit was dropped. But the move also constitutes a serious escalation in the SEC’s anti-crypto legal roadblock.
“Given the SEC’s ongoing lawsuits against Coinbase and others as well as their complete refusal to provide clarification or a registration pathway to those operating legally in the United States, we can only conclude that it This is the latest policy effort to target even the best. “Players are building technology on blockchains,” Uniswap said in a blog announcing the Wells notice.
The SEC’s biggest crypto cases so far have targeted centralized institutions — the aforementioned centralized exchanges Coinbase and Kraken and the company behind the XRP cryptocurrency, Ripple. Pursuing the organization behind a decentralized protocol like Uniswap is uncharted territory.
Perhaps the closest example in the books would be the The SEC’s case against LBRY, which built a decentralized alternative to YouTube that was forced to shut down after a lengthy appeal process with the U.S. securities watchdog. The SEC alleges that LBRY sold unregistered securities through the launch of a utility token and initially sought a $22 million fine, but lowered it to $111,000 after acknowledging the company’s financial difficulties .
The ongoing international lawsuits against the developers of Tornado Cash could also be instructive, given that these cases in the United States and the Netherlands have become symbols of whether individuals are responsible for the way their self-executing code is used after making it public. .
“The SEC is very imaginative in how you can violate its rules,” Bill Hughes, senior counsel and director of global regulatory matters at Consensys, told CoinDesk. It is conceivable that part of the problem is that Uniswap Labs runs the largest portal to the Uniswap protocol through uniswap.org. Another potential concern is the UNI governance token, launched to give users some control over the protocol’s governance, but which could be distorted to resemble a securities offering.
That said, Hughes does not believe the SEC will take action against holders or users of Uniswap tokens. “If you’re one of those and you’re a little panicked, take a breath and calm down,” he said. said the. “If they sued you too, you’d get an email from the SEC asking to talk to you on the phone. You won’t get one, so relax.”
Regardless, Hughes suggested that this is likely the biggest hit the SEC will take against the DeFi industry. The SEC’s decision “was to go after someone in a certain category and one or two others before moving on to another category…like going after Coinbase and then Kraken.” We’ll see if they pursue other DEXs.
CORRECTION (April 11, 2024, 7:44 p.m. UTC): Corrects spelling of Uniswap name in title.