Uniswap Challenges SEC: Tokens Not Securities, Says Chief Legal Officer

• Uniswap Labs responded to the SEC’s Wells notice by calling the legal arguments weak and stating that it is prepared to fight in court.

• The company emphasizes that tokens on Uniswap are not securities.

Uniswap [UNI], a prominent decentralized exchange (DEX), is navigating significant challenges and opportunities. Recently, the SEC issued a Wells Notice to the team, bringing Uniswap under regulatory scrutiny. Often a precursor to formal charges, this notice suggests potential regulatory actions against Uniswap. 

Uniswap Responds to SEC, Challenges Agency’s Jurisdiction

Uniswap Labs has addressed the Securities and Exchange Commission (SEC) to challenge the agency over its potential enforcement actions.  The decentralized exchange filed a 43-page document listing all the reasons why the SEC cannot regulate the primary assets traded on the decentralized platform. The SEC had previously served Uniswap with a Wells notice, signaling potential legal action.

Marvin Ammori, Chief Legal Officer at Uniswap Labs, promptly responded, asserting the project’s adherence to U.S. regulations. Ammori contended that the SEC is overstepping its boundaries, targeting entities and individuals beyond its purview.

Today, @Uniswap has submitted our response to the SEC Wells notice we received in April.

The Uniswap protocol represents an innovation in commerce that solves long-standing problems– with near-instant, intermediary-free, secure trading of any assets. It is the first widely used…

— Marvin Ammori (@ammori) May 21, 2024

Ammori further noted that the majority of Uniswap’s usage is outside the United States, with 75% of the usage and nearly 90% of the trading volume happening in other countries. He further stated that this puts a cap on the extent to which the SEC can regulate the platform. Uniswap has already stated its position regarding the accusations made by the SEC and is ready to proceed to court if needed.

Uniswap Governance Proposes Fee Collection System

Amid such regulatory challenges, the governance mechanisms in Uniswap remain dynamic. Currently, there is a rather important proposition under the vote of UNI token holders, which is expected to take place on May 31. This proposal seeks to create an automatic process of collection and distribution of fees accrued from trades on Uniswap V3 pools. If implemented, this system will allocate collected fees in a proportional manner to UNI holders who stake and delegate tokens. While the initial vote does not immediately implement fees, it sets the foundation for future votes to finalize fee specifics in Uniswap V3. 

It also outlines recommendations for the simplification of future fee-related votes, increasing effectiveness and decreasing the burden of governance. This forward-thinking approach will ensure that Uniswap remains neutral, a cornerstone of the decentralized exchange model.

The proposal has already had a positive impact on the company’s performance in the UNI market. Currently, UNI is at $11.29, which is a 5% increase in value at the time of this article’s writing. This increase can be attributed to the market’s belief in the proposed governance changes and the positive impact on Uniswap’s tokenomics.

Consensys and Robinhood Also in SEC’s Crosshairs

Uniswap’s response comes against the backdrop of several legal battles between the SEC and other leading crypto firms. Last month, Consensys decided to sue the SEC before it could act after the company had been issued a Wells notice. The lawsuit alleges that the SEC has gone rogue and has not offered sufficient guidance, especially on issues related to Ethereum or ether as securities.

Moreover, Robinhood reported earlier this month that the agency had issued a Wells notice regarding its cryptocurrency business. The regulatory focus is on asset offerings, custody, and operations that Robinhood Crypto provides. Robinhood explained that the possibility of an enforcement action may lead to certain consequences, such as civil orders, administrative proceedings, and fines.