Uniswap Labs, the company behind the largest decentralized crypto exchange Ethereum, has called on the Securities and Exchange Commission (SEC) to drop its planned lawsuit against them, arguing that the fight is not worth it.
In April, Uniswap Labs received a Wells notice from the SEC, a warning that the regulator believed the company was violating the law. In the notice, the Uniswap protocol was accused of operating as an unregistered securities exchange, while its interface and wallet were accused of being an unregistered securities broker.
In response to the SEC's Wells notice, Uniswap Labs disputed these allegations. The company argues that the protocol does not meet the definition of an exchange and is therefore not subject to SEC regulation. Although Uniswap Labs developed the protocol, it argues that the protocol is now a “passive” technology used for cryptocurrency trading.
Uniswap Labs Chief Legal Officer Martin Ammori stated that the SEC must redefine the concept of an exchange to have jurisdiction over Uniswap. According to the current definition, Uniswap should have been designed specifically for securities trading. “It is general purpose and the majority of its volume consists of non-security assets such as Ethereum, Bitcoin and stablecoins,” Ammori said, noting that these assets constitute 65% of the protocol's transaction volume.
Ammori also pointed out that the SEC's current exchange definition does not include any of Uniswap Labs' products. He explained that the SEC is currently trying to redefine several terms in its regulations to try to catch them, and that he believes this move exceeds the authority given to the SEC by Congress.
Additionally, Ammori rejected the SEC's claim that Uniswap's interface and wallet are brokers, citing a recent federal court decision rejecting the SEC's claim that Coinbase Wallet is an unregistered securities broker.
*This is not investment advice.