Breaking: Uniswap Labs Replies to SEC Wells notice
Uniswap Labs has finally filed a response to the Wells notice from the Securities and Exchange Commission (SEC) and called on the agency to abandon its enforcement action against the company.
The notice, released in April, alleges that the company has violated securities laws by functioning as an unregistered securities exchange and broker. Uniswap Labs claims that the SEC does not have jurisdiction to regulate its decentralized protocol under current legal categorizations.
Uniswap Challenges SEC’s Jurisdiction
The Chief Legal Officer of Uniswap Labs, Martin Ammori, said in the company’s response that the SEC would have to expand the definition of an exchange in order to regulate the firm.
In his argument, Ammori opined that most tokens traded on the Uniswap Protocol are not securities under the federal law.
The company argues that the SEC has failed to give clear definitions of which digital assets are considered securities hence causing a lot of confusion to DeFi projects.
Today we responded to the SEC’s Wells notice
We believe DeFi is revolutionary and we’re going to fight to protect it
Summary of our response and the full 40 page document here:https://t.co/u4fEWHVMVu
— Uniswap Labs
(@Uniswap) May 21, 2024
The company underlines the decentralised approach of its protocol, stating that the protocol is self-governed and has no affiliation with Uniswap Labs as a company. Moreover, it argues that its independence means that it cannot be held accountable for compliance with the securities laws.
Legal Contentions Over Regulatory Authority
In response to the Wells notice, Uniswap Labs challenges the SEC’s understanding of Rule 3b-16, which broadens the meaning of “exchange” to include DeFi platforms. The company has argued that this expansion violates the Exchange Act and goes beyond the jurisdiction of the SEC without the approval of the Congress.
The company has stated that the proposed amendments infringe on the principles of the division of powers and the doctrine of non-delegation.
Uniswap also argues that the SEC’s proposed rule changes do not even offer reasonable notice to regulated entities, which may be a violation of the Due Process Clause in the US Constitution. The company also alleges that the proposed amendments constitute arbitrary and capricious agency action under the APA because the SEC has not provided sufficient justification for its position or considered the impact on the DeFi sector.
Background of SEC’s Actions
SEC’s focus on Uniswap Labs started in September 2021 after reports revealed that the agency had opened an investigation into the company. According to reports, the SEC wanted to know how investors use the Uniswap exchange and how it is promoted. They were not accusing anyone of doing anything wrong at that time, but merely sought to obtain information.
The investigation was made as part of a wider scrutiny of the DeFi sector, with the SEC chair Gary Gensler stating the need to regulate the DeFi space.
Gensler stated that DeFi projects with governance structures and fees could potentially be considered securities even if the exchange is not controlled by a central body. This stance signaled the agency’s willingness to enforce existing securities laws to this emerging DeFi space.
Uniswap’s Legal Representation
Uniswap Labs has also put together a strong legal team to handle the enforcement action by the SEC. The team comprises Andrew Ceresney, the SEC’s former head of enforcement, who formerly served Ripple in a legal dispute with the SEC, and Don Verrilli, the former US Solicitor General, who represented Grayscale in a legal case against the SEC.
Uniswap Labs is willing to take the matter to court if needed, claiming that it has strong grounds to do so and that it will ultimately prevail in the lawsuit.
However, the company believes that the SEC will change its strategy since it does not serve the interests of the investors or the American public. Uniswap states that legal measures against it may force American crypto traders to engage in foreign trading platforms and stifle innovation in financial services.
Read Also: Coinbase, Ripple, Meta, Kraken, Others Form Tech Against Scams Coalition
The post Breaking: Uniswap Labs Replies to SEC Wells notice appeared first on CoinGape.