Uniswap Cites Supreme Court Ruling, Asks SEC to Reconsider Proposed DeFi Amendments

Uniswap Labs, the developer behind the Uniswap Decentralised Exchange, has urged the SEC to drop its proposal to rule over Defi

Uniswap Labs, the company behind the popular decentralized exchange (DEX) Uniswap, has urged the Securities and Exchange Commission (SEC) to withdraw its proposed amendments to the definition of an "exchange" and to extend the comment period on the proposal.

Uniswap Labs made the request in a letter to the SEC on Monday, following the Supreme Court's recent decision in Loper Bright Enterprises v. Raimondo. The decision limited the Chevron Deference, which gives administrative agencies broad authority in interpreting ambiguous statutes.

According to Uniswap Labs, the Supreme Court's ruling "fundamentally alters the legal landscape" and "renders the SEC's proposed amendments legally unsound." The company argues that the amendments, which were proposed in December 2022, would expand the SEC's authority over DEXs without clear statutory support.

"The proposed amendments are likely to be rejected by the Supreme Court if challenged," Uniswap Labs wrote in the letter.

The company also highlighted the recent comments by Coinbase Chief Legal Officer Katherine Minarik on the matter. In a tweet on Monday, Minarik stated that both the SEC and the industry have better ways to spend their resources than in litigation over an unlawful rule.

"Coinbase is ready to work with the SEC on a sound legal framework for crypto regulation," Minarik added.

The SEC's Wells Notice to Uniswap Labs

The SEC's attention on Uniswap Labs intensified in April when the company received a Wells Notice from the SEC. The notice signifies the SEC's intent to pursue administrative or legal action against Uniswap Labs for allegedly operating an unregistered securities exchange and broker-dealer, among other violations.

The SEC alleges that Uniswap's decentralized exchange, which facilitates the trading of digital assets without the involvement of a central intermediary, falls under the definition of an "exchange" and that its activities in facilitating securities trading require registration with the SEC.

However, Uniswap maintains that its protocol is not an exchange and that it serves as a passive technology that merely facilitates trades initiated by users on its open-source software.

"Our protocol is not an exchange. It's a piece of decentralized technology that enables trades to occur on-chain," Uniswap stated in a blog post.

"We're not surprised by the SEC's heavy-handed approach, which seems politically motivated. We're prepared to challenge the SEC's actions, and we're ready to take this all the way to the Supreme Court if necessary," the company added.

Uniswap Labs to Challenge SEC's Actions in Supreme Court if Needed

In its letter to the SEC, Uniswap Labs also highlighted its commitment to legal compliance and its willingness to engage in good faith with the SEC to establish a sound regulatory framework for DEXs.

"Uniswap Labs is fully committed to legal compliance and the responsible development of Web3. We stand ready to work with the SEC to establish a sound regulatory framework for decentralized exchanges that is consistent with the current legal landscape and the limits set by Congress," the company stated in the letter.

However, Uniswap Labs also expressed its concerns that the SEC's proposed amendments, if implemented, would not only stifle innovation and create legal uncertainty but also negatively impact the broader DeFi industry, which handles trillions of dollars in transactions annually.

"We urge the SEC to reconsider its proposed amendments and to extend the comment period to allow for meaningful public participation in light of the Supreme Court's recent decision," Uniswap Labs concluded in the letter.

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