The United States Securities and Exchange Commission (SEC) has taken action against the decentralised exchange Uniswap, issuing a Wells notice to the platform.
Marvin Ammori, Uniswap’s chief legal officer, confirmed the SEC’s notice on April 10 via X (formerly Twitter), expressing disappointment but not surprise at the SEC’s move:
“If the SEC had authority over our self-custodial, non-intermediated products, it could tell us how to register them. It can’t and so it doesn’t. It has provided no clarity and no guidance – as several SEC commissioners have stated in multiple dissents.”
A Wells notice is a formal notification from the SEC indicating its staff’s intent to recommend enforcement action against a company or individual. The recipient has the opportunity to submit a written response (a “Wells submission”) explaining why the enforcement action should not be pursued.
Uniswap facilitates automated token exchanges on the Ethereum blockchain, enabling users to swap various crypto tokens without the need for traditional intermediaries like centralised exchanges.
The SEC has been investigating Uniswap Labs, the primary developer behind Uniswap, since 2021. In response to regulatory pressure, Uniswap Labs has delisted several tokens from its platform.
As part of its defence, Uniswap Labs has asserted that it merely develops the front-end interface for the application, which is separate from the autonomous Uniswap protocol itself, released for public use.
Ammori clarified that the Uniswap Protocol, web app, and wallet do not meet the legal definitions of securities exchange or broker. He emphasised the protocol’s support for crypto regulations based on clear rule of law, rather than arbitrary enforcement and abuse of power.
This action from the SEC is reminiscent of similar notices issued to crypto exchanges Coinbase and Binance in the past.
While the SEC pursues legal action against crypto protocols in the U.S., the European Union is progressing with its Markets in Crypto-Assets (MiCA) regulation, which covers DeFi protocols and their front-ends. The EU regulator is tasked with assessing the feasibility of specific regulations for the decentralised finance market by December 30, 2024, particularly focusing on decentralised systems without a clear issuer or service provider and how they should be regulated in the region.