SEC Faces Backlash From Uniswap Labs Over Proposed DeFi Regulations

• 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 that the U.S. Securities and Exchange Commission (SEC) reconsider its proposed amendments to the Securities Exchange Act of 1934. The changes seek to broaden the definition of an “exchange,” which Uniswap says exceeds 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 Katherine Minarik, Coinbase’s chief legal officer, argued in favor of Uniswap based on the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo. That decision overturned the Supreme Court’s decision in Chevron, which had previously allowed federal agencies to interpret ambiguous statutory provisions.

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Supreme Court decision sparks debate

Without Chevron’s deference, Uniswap Labs argues that the SEC’s interpretation of the term “exchange” is unfounded and overly broad. They argue that the statutory definition does not encompass DeFi protocols and believe that courts will likely reject the SEC’s amendments.

In April, tSEC Sent Well Notice to Uniswap Labs, hinting at possible legal action against the company for offering securities exchanges without proper registration.

Uniswap Labs defended itself by saying that its protocol is not an exchange but a passive technology. They say the SEC needs to come up with a new definition of an exchange to cover what they’re doing.

In light of the Supreme Court’s decision, Uniswap Labs urged the SEC to extend the comment period on the proposed amendments. They emphasize that the legal environment has changed, requiring renewed public engagement. The initial comments were based on a legal standard assuming deference to Chevron, which is no longer valid.

Uniswap Labs is demanding a rigorous review to determine whether the new laws are consistent with existing legal requirements and congressional jurisdictions. The proposed changes could stifle innovation and create legal ambiguity, which is destructive to the DeFi industry that facilitates trillions of dollars in transactions.

The company also points to recent court precedents such as SEC v. Coinbase, Inc. and SEC v. Binance Holdings, where courts have been reluctant to apply the SEC’s powers to decentralized crypto services. They argue that the SEC’s preference for regulation through enforcement rather than providing clear guidance creates legal uncertainty and conflicting decisions.

These cases, as Uniswap Labs points out, demonstrate judicial resistance to applying traditional securities laws to the decentralized aspects of the cryptocurrency market, which could indicate how courts will receive the SEC’s proposed rule changes.

Uniswap’s Commitment to Legal Compliance

Despite regulatory pressures, Uniswap Labs remains committed to defending its position and the DeFi ecosystem. Earlier this year, Hayden Adams, Founder of Uniswap They said they were 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 as it fails to address the fraudsters. Uniswap Labs is prepared to fight back against the SEC’s actions and considers them politically motivated and is therefore prepared to take legal action in the Supreme Court if necessary. At the time of writing, UNI is trading at $8.11, down 1.1% over 24 hours.

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