Uniswap, the decentralized exchange, experienced a sharp decline in its token price, UNI, after revealing that it had received a notice of a proposed lawsuit from US regulators. However, Uniswap is prepared to fight this legal action. Within an hour of the announcement, UNI dropped 10% from $11.21 to $10, reaching its lowest point since late February at $9.66, according to Cointelegraph Markets Pro. TradingView data shows that UNI’s price drop puts it at a 47-day low.
Hayden Adams, the founder of Uniswap Labs, expressed his response to the situation, stating that he is not surprised but rather annoyed, disappointed, and ready to fight. He believes that this fight could take years and may even reach the Supreme Court. Uniswap did not disclose the exact details of the notice, but in a blog post, it argued that UNI is not a security and does not meet the legal definitions of securities exchange or broker in the US.
The Securities and Exchange Commission (SEC) did not comment on the existence or nonexistence of a possible investigation. Bill Hughes, Consensys senior counsel and regulatory matters director, clarified that SEC staff would need approval from the agency’s five commissioners, including chair Gary Gensler, before proceeding with the lawsuit. Hughes believes that a lawsuit is inevitable, but it has not been filed yet.
Despite the uncertainty, Hughes reassured those who are concerned that it is highly unlikely for the SEC to target UNI holders or protocol users. Former SEC internet enforcement chief John Reed Stark explained that a Wells notice gives the recipient the opportunity to argue against a recommended lawsuit. He expressed his surprise at the way Uniswap responded to the notice, criticizing their PR campaign against the SEC.
Stark predicted that the SEC would file a comprehensive complaint, which would likely withstand dismissal motions and be successful on other litigated issues. Gabriel Shapiro, former general counsel of Delphi Labs, believed that the SEC would win on securities issues with UNI but would lose if it claimed Uniswap was a securities exchange. Paul Grewal, the legal chief of Coinbase, who is also facing a lawsuit from the SEC, agreed with Shapiro’s assessment.
Grewal referred to a recent judge’s decision in the SEC’s case against Coinbase, which found that the SEC had failed to provide sufficient evidence that Coinbase engaged in brokerage activity through its decentralized Coinbase Wallet. This decision raises doubts about the SEC’s ability to argue that Uniswap is a broker. Ultimately, the outcome of these legal battles will determine the extent of SEC Chair Gary Gensler’s authority over crypto regulation.