The decentralized exchange Uniswap has received a formal notification, known as a Wells notice, from the United States Securities and Exchange Commission (SEC). Uniswap’s chief legal officer, Marvin Ammori, confirmed the notice on April 10th, expressing disappointment but not surprise given the SEC’s history. A Wells notice is issued by the SEC to inform a company or individual that enforcement action may be recommended against them. It provides an opportunity for the recipient to submit a written explanation or argument, known as a Wells submission, to defend against such action.
Uniswap is a decentralized exchange that facilitates automated token exchanges on the Ethereum blockchain, eliminating the need for traditional intermediaries like centralized exchanges.
The SEC has been investigating Uniswap Labs, the main developer behind Uniswap, since 2021. In response to regulatory pressure, Uniswap has previously removed several tokens from its platform.
Uniswap Labs has argued that it is solely responsible for developing the front-end portal to the app, while the Uniswap protocol itself is autonomous code released for public use. According to Ammori, the Uniswap Protocol, web app, and wallet do not meet the legal definitions of securities exchange or broker. He emphasized the importance of clear regulations and the rule of law in the cryptocurrency industry, rather than arbitrary enforcement and abuse of power.
The SEC has issued similar notices in the past, warning crypto exchanges Coinbase and Binance about potential legal actions.
While the U.S. SEC focuses on legal actions against crypto protocols, the European Union is making progress with its Markets in Crypto-Assets (MiCA) regulation for decentralized finance (DeFi) protocols and their front-ends. The EU regulator is tasked with preparing a report by December 30, 2024, to evaluate the feasibility of specific regulations for the decentralized finance market. The report will explore how decentralized systems, particularly those without a clear issuer or service provider, should be regulated in the European region.