Breaking: Uniswap Labs Calls for SEC’s Reconsideration of DeFi Rule Expansion

Uniswap Labs urges the SEC to rethink the DeFi regulation pointing to a recent Supreme Court decision as well as suggesting that some regulatory definitions may be going too far.

In its challenge, Uniswap Labs refers to a Supreme Court decision that has nullified Chevron’s deference in that it can no longer rely on the presumption of agency expertise. It was recently issued with a Wells notice by the SEC alleging it is running an unregistered securities exchange.

Calling for renewed public comments on this issue, Uniswap contends that under Chevron’s deference ruling, the SEC’s proposed definition of exchanges should be revisited.

The petition is coming from Uniswap Labs which is trying to persuade the U.S. Securities and Exchange Commission (SEC) to take another look at some proposed changes it made concerning the Securities Exchange Act of 1934 that seek to expand what constitutes an “exchange”.

Accordingly, Uniswap argues that the SEC will exceed its powers over DeFi platforms with these amendments and the Supreme Court will likely void them based on one of its recent decisions.

SEC on Notice Over DeFI Rule- Uniswap Labs

According to Coinbase CLO Katherine Minarik, Uniswap Labs made the central argument premised upon Loper Bright Enterprises v. Raimondo, a recent decision by The Supreme Court, which thus changed everything about the legal framework. This ruling abrogates Chevron’s deference thereby removing federal regulators’ ability to interpret vague statutory mandates.

Without this deference, Uniswap Labs argues that the SEC’s interpretation of ‘exchange’ would be boundless and uncorroborated. Uniswap Labs argues that DeFi protocols do not fall under the statutory definition and asserts that courts will likely dismiss the SEC’s proposed amendments.

In April, Uniswap Labs received a Wells Notice from the SEC, which means that the regulator is planning to sue.

The notice accused Uniswap of engaging in securities trading without registering as an exchange or a broker. On defense, however, Uniswap Labs denies being termed an exchange but instead sees itself as a passive technology. The company stated that accommodating them under the existing definition of an exchange would require the SEC to revise it.

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Call for Reopened Comment Period

Uniswap Labs has asked for reconsideration of proposed amendments by the SEC following the Supreme Court decision and also appealed for an extension of the comment period. They argue that there is substantial change in the legal environment which necessitates new public participation.

The initial comments were made under a standard based on Chevron deference, which no longer exists.

Uniswap Labs has emphasized that there should be a review to ensure that any new laws are consistent with the current legal framework and do not exceed what Congress has provided as limits.

In the same vein, Uniswap Labs also said that the proposed changes will stifle innovation and lead to vagueness in law. They pointed out that these amendments could have adverse implications on the DeFi industry worth trillions of dollars in transactions.

The company further cites past court decisions that have shown reluctance to enforce securities laws against decentralized crypto services by referencing SEC v. Coinbase, Inc. and SEC v. Binance Holdings. They argue that this type of regulation may result in different legal outcomes and regulatory uncertainty because it is based on enforcement rather than rules-based regulation.

Legal Compliance: Uniswap’s Promise

Nonetheless, Uniswap Labs’ refusal to give up its claim and the DeFi ecosystem are seeing the company’s assertion under regulatory duress. In an interview earlier this year, Hayden Adams, who founded Uniswap stated that they always “operate within the bounds” of legality while pointing out problems with how the SEC handles its regulatory approach.

For instance, Adams says targeting big players such as Coinbase and Uniswap without routing out fraudsters, hurts markets.

Uniswap Labs is ready to resort to the Supreme Court for the prosecution of what it terms political actions by the SEC.