DeFi
Uniswap Labs Urges SEC to Rethink DeFi Rule
Uniswap Labs has formally requested that the U.S. Securities and Exchange Commission (SEC) review proposed regulatory amendments to the Securities Exchange Act of 1934 that would broaden the definition of an “exchange.”
Uniswap claims the proposed changes would infringe on the SEC’s authority over DeFi platforms and are likely to be struck down by the Supreme Court based on the recent ruling.
Uniswap Labs Urges SEC to Rethink DeFi Rule
According to Katherine Minarik, head of FX operations at Coinbase, Uniswap Labs’ main argument is based on the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which changed the legal framework. The decision overturned the deference granted to Chevron, which had allowed federal agencies to implement uncertain statutory provisions.
Uniswap Labs argues that without this deference, the SEC’s interpretation of the term “exchange” is open-ended and unsupported. They suggest that the definition in the law does not cover DeFi protocols and that the SEC’s amendments will most likely be rejected by the courts. Uniswap Labs had received a Reviews of wells by the SEC in April, meaning the regulator is considering taking legal action against the company.
The notice claimed that Uniswap was trading securities without being registered as an exchange and broker-dealer. Uniswap Labs, however, defended itself by saying that its protocol did not qualify as an exchange and was instead a passive technology. The company said the SEC should amend the current definition of an exchange to include its operations.
Call for reopening of comment period
Following the Supreme Court’s decision, Uniswap Labs urged the SECOND to reconsider the proposed amendments and extend the comment period. They argue that the legal environment has changed significantly to require further public participation. The initial comments were made under a legal standard that assumed deference from Chevron, which is no longer valid.
For this reason, Uniswap Labs has highlighted the need for a review to ensure that any new law is consistent with the current legal framework and does not exceed the limits set by Congress.
At the same time, Uniswap Labs also argued that the proposed amendments would hamper innovation and lead to legal ambiguities. They noted that the amendments could negatively impact the DeFi sector, which is responsible for trillions of dollars in transactions.
The company also points to previous court decisions that have demonstrated a reluctance to enforce securities laws against decentralized crypto services, citing SEC vs. CoinbaseInc. and SEC v. Binance Holdings. They counter that the SEC’s mode of regulation, which relies on enforcement actions rather than final rules, is likely to produce different legal results and regulatory ambiguity.
Uniswap’s Commitment to Legal Compliance
However, Uniswap Labs is not ready to give up its claim and the DeFi ecosystem to regulatory pressures. Earlier this year, Uniswap founder Hayden Adams They said they were operating legally and that the SEC’s approach to regulation was problematic.
According to Adams, the SEC’s decision to target relatively large players like Uniswap and Coinbase without vetting the fraudsters is hurting the market.
Uniswap Labs is prepared to challenge the SEC’s actions, which it considers political, and is ready to continue the legal battle all the way to the Supreme Court.
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