Uniswap Labs, the company behind the popular decentralized exchange (DEX) Uniswap, is urging the U.S. Securities and Exchange Commission (SEC) to drop its proposal for regulating the DeFi (decentralized finance) space.
The SEC’s proposal, put forward in April 2023, seeks to expand the definition of an “exchange” under the Exchange Act of 1934. This broader definition would bring DeFi platforms like Uniswap under the SEC’s regulatory umbrella.
Uniswap has consistently opposed this move. In a recent letter to the SEC, they bolstered their argument by referencing the Supreme Court’s recent decision in Chevron v. Natural Resources Defense Council. This landmark case altered the way courts interpret regulations from federal agencies. Previously, courts would sometimes defer to an agency’s interpretation, even if it seemed strained. However, the Chevron decision suggests courts are now less likely to do so.
Uniswap argues that the SEC’s proposed amendments to the definition of “exchange” are unlikely to survive a legal challenge in light of the Chevron ruling. They believe the SEC would be wasting resources pursuing this route.
Furthermore, Uniswap contends that the SEC’s proposed definition is overly broad and lacks clear boundaries. This ambiguity could lead to a situation where the SEC regulates DeFi on a case-by-case basis, resulting in inconsistencies and a lack of clear guidance for the industry.
In their blog post, Uniswap emphasizes that the SEC should abandon the proposed amendments entirely. They argue that the legal landscape has shifted significantly since the proposal was drafted.
As an alternative, Uniswap suggests that the SEC, at the very least, reopen the comment period for the proposal. This would allow the public to weigh in on the implications of the Chevron decision.
The SEC’s efforts to regulate DeFi have created tension within the cryptocurrency industry. In April 2024, the SEC issued a Wells notice to Uniswap, indicating their intention to pursue enforcement action. Uniswap responded by criticizing the SEC’s legal arguments and expressing their willingness to fight the matter in court.
The back-and-forth between Uniswap and the SEC highlights the ongoing debate surrounding DeFi regulation. It remains to be seen how this dispute will be resolved, but the recent Supreme Court decision has undoubtedly added a new wrinkle to the conversation.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
About The Author
