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- Uniswap Labs has asked the SEC to reconsider its proposed rule changes to the Securities Exchange Act of 1934.
- Uniswap Labs argues that the proposed amendments conflict with a recent Supreme Court ruling.
Uniswap Labs has formally requested the U.S. Securities and Exchange Commission (SEC) to reconsider its proposed amendments to the Securities Exchange Act of 1934. These changes aim to expand the definition of an “exchange,” which Uniswap contends overreaches the SEC’s authority over decentralized finance (DeFi) platforms.
Uniswap Labs argues that the proposed amendments conflict with a recent Supreme Court ruling. According to Coinbase Chief Legal Officer Katherine Minarik, Uniswap’s argument hinges on the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo. This ruling overturned the Chevron deference, which had previously allowed federal agencies to interpret ambiguous statutory provisions.
Today @Uniswap Labs urged the SEC not to proceed with its proposed rulemaking that would dramatically and improperly expand the definition of an ‘exchange’ to include DeFi and more. 1/x
— Katherine Minarik (@MinarikLaw) July 9, 2024
Supreme Court Ruling Sparks Debate
Without Chevron’s deference, Uniswap Labs asserts that the SEC’s interpretation of “exchange” is unsupported and overly broad. They argue that the statutory definition does not encompass DeFi protocols and believe courts will likely dismiss the SEC’s amendments.
In April, the SEC sent a Wells Notice to Uniswap Labs, hinting at possible legal action for the firm for offering securities trading without due registration.
Uniswap Labs has defended itself, stating that its protocol is not an exchange but a passive technology. They claim that the SEC needs to provide a new definition of an exchange to cover what they do.
In light of the Supreme Court ruling, Uniswap Labs has urged the SEC to extend the comment period on the proposed amendments. They emphasize that the legal environment has changed, necessitating renewed public participation. The initial comments were based on a legal standard assuming Chevron deference, which is no longer valid.
Uniswap Labs requires strict scrutiny to determine whether the new laws conform to the existing legal requirements and congressional jurisdictions. The changes proposed could choke innovation and generate legal ambiguity, which is destructive to the DeFi industry that facilitates trillions of dollars in transactions.
The company also points to recent court precedents like SEC v. Coinbase, Inc., and SEC v. Binance Holdings, where the courts were hesitant to apply the SEC’s authorities over the decentralized crypto services. They state that the SEC’s preference for regulation by enforcement over the provision of clear guidelines creates legal uncertainty and contradictory decisions.
These cases, as pointed out by Uniswap Labs, show the judicial resistance to the application of the traditional securities laws to the decentralized aspects of the crypto market, which could signal how the courts will receive the SEC’s proposed rule changes.
Uniswap’s Commitment to Legal Compliance
Despite the regulatory pressures, Uniswap Labs remains committed to defending its position and the DeFi ecosystem. Earlier this year, Uniswap founder Hayden Adams said that they are operating legally and criticized the SEC for regulating the industry.
Adams claims that the decision to focus on the major players, including Uniswap and Coinbase, is counterproductive since it fails to address the fraudsters. Uniswap Labs is ready to fight back the SEC’s actions and considers them as politically driven and thus ready to take legal actions to the Supreme Court if needed. At the time of writing, UNI is trading at $8.11, registering a 24-hour decline of 1.1%.
