In response to the SEC’s Wells Notice, Uniswap has urged the commission to stay within its constitutional bounds and take lessons from previous rulings.
Uniswap, a decentralized exchange, has argued against the U.S. Securities and Exchange Commission’s legal explanation and definition of some DeFi instruments and has called on the agency to reconsider its claims made in last month’s Wells Notice.
The government announced preparations to sue Uniswap Labs in April for allegedly running an unregistered securities exchange and broker using its wallet product and Ethereum-based automated market-making (AMM) protocol.
The SEC, led by Chair Gary Gensler, maintains that most blockchain assets are securities and that failure to register would have violated current federal financial laws. As such, the Wells Notice is part of a larger assault on cryptocurrency operators.
Conflict Over Classification of Tokens
Gensler and his colleagues operate under the “false assumption that just about ‘all’ tokens are securities (which the SEC then refuses to register) according to Uniswap CLO Marvin Ammori.
Ammori compared tokens to value-representing file formats like JPGs and PDFs. According to him, the majority of these tokens are stablecoins like Tether (USDT), Bitcoin (BTC), and Ether (ETH).
Ammori states these three assets account for about 65% of the platform’s trading volume. He insisted that the Uniswap protocol complies with U.S. law in its entirety.
Uniswap further said that the SEC’s planned litigation was an abuse of Congress’s authority granted to the organization. According to Uniswap, over 90% of traffic may be outside of SEC jurisdiction because an estimated 75% of usage occurs outside the United States.
Even if the Ethereum protocol supposedly encouraged securities trading, Ammori believed the agency would still need to redefine what constitutes a securities exchange. The web3 corporation responded to the crypto community, saying, “Our case is so strong that the SEC is trying to change the law to fight us.”
The attorney for Uniswap emphasized that the SEC’s allegations of being an unlicensed broker were based on grounds that had been deconstructed in earlier lawsuits against companies such as Coinbase and Ripple.
Ammori noted that a federal judge also censured the commission for misusing its authority in the DEBT Box, demonstrating the regulator’s lack of sincerity when handling cryptocurrency.
The blockchain startup is prepared to take on the SEC and hopes to emerge victorious against the country’s top securities regulator. The SEC would lose if it filed a lawsuit, and its losses would weaken the agency’s future control over DeFi, cryptocurrencies, and other technologies.
