Uniswap Labs Urges SEC to Reconsider Proposed Rule Expansion

Uniswap challenges SEC’s authority in response to enforcement notice, citing legal and constitutional issues.
Uniswap Labs Urges SEC to Reconsider Proposed Rule Expansion

Uniswap Labs has called on the U.S. Securities and Exchange Commission (SEC) to withdraw its pending enforcement action against the decentralized finance (DeFi) platform. This appeal comes in response to a Wells notice issued by the SEC, which signals the regulator’s intent to pursue legal action against Uniswap for allegedly operating as an unregistered securities exchange and broker.

In its formal response, Uniswap Labs argues that the SEC’s proposed rule changes overstep the agency’s legal authority. The company contends that the SEC would need to redefine key terms within securities law to claim jurisdiction over Uniswap’s protocol. According to Martin Ammori, Uniswap’s Chief Legal Officer, the regulator’s current approach is flawed and unlikely to succeed in court .

The Wells notice specifically targets Uniswap’s native UNI token and liquidity provider (LP) tokens, alleging they constitute unregistered securities. Uniswap refutes this, arguing that LP tokens are merely bookkeeping devices and do not fit within traditional securities frameworks . The company further claims that the decentralized nature of its protocol, which operates autonomously and is not controlled by Uniswap Labs, places it outside the SEC’s regulatory scope.

Uniswap also highlights several constitutional and legal principles that it believes the SEC’s actions violate. These include the major questions doctrine and the non-delegation doctrine, which prevent regulatory bodies from expanding their authority without clear congressional authorization. Additionally, Uniswap argues that the SEC’s actions lack proper justification and fail to consider the potential negative impacts on the DeFi sector, potentially infringing on the Due Process Clause of the U.S. Constitution .

Uniswap Labs has expressed its readiness to litigate if necessary but hopes the SEC will reconsider its strategy. The company warns that aggressive regulatory actions could push American crypto users to foreign platforms and stifle innovation in the financial technology sector .

DisclaimerPlease note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.

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