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UNI Price Rises 20% as Uniswap Labs Rejects SEC’s Wells Notice
Uniswap Labs, the creator of one of the largest decentralized trading platforms, is contesting a potential enforcement action by the U.S. Securities and Exchange Commission (SEC), arguing that crypto tokens should not be classified as securities.
The New York-based company recently refuted accusations that it operates as an unregistered exchange and broker-dealer. This response follows the SEC issuing a Wells Notice to Uniswap Labs, signaling his intention to recommend legal action against the company.
Uniswap Labs disputes the SEC’s claims
In a 40 page archive filed with the SEC, Uniswap Labs outlined numerous reasons why the agency’s lawsuit should be reconsidered. The SEC’s claims are based primarily on the assumption that all tokens are securities, a premise that Uniswap Labs disputes.
Marvin Ammori, Chief Legal Officer of Uniswap Labs, underlined that tokens are simply a file format for value and not inherently securities. He criticized the SEC’s attempt to redefine the terms “exchange,” “broker” and “investment contract” to encompass Uniswap’s operations.
This year, the SEC has taken action against numerous crypto firms through Wells notices, lawsuits, or settlements.
That of the commission scrutiny has increasingly focused on Ethereum and decentralized financial operators, including Uniswap, ShapeShift, TradeStation and Consensys. Additionally, reports suggest that the Ethereum Foundation is under investigation.
Distinction between tokens and securities
Uniswap Labs you think that the SEC’s case against them is flawed. It fails to recognize the distinction between tokens as files of value and tokens as securities.
If the SEC proceeds with a lawsuit accusing Uniswap Labs of operating as an unregistered exchange, it would risk facing negative consequences regarding its authority over crypto tokens.
Uniswap Labs warned that such litigation could set a precedent undermining ongoing regulatory efforts by the SEC. The company expressed its willingness to take legal action if necessary and expressed confidence in a favorable outcome, stating:
But we are ready to fight. Our attorneys are 2-0 in high-profile SEC cases. Andrew Ceresney, former head of SEC enforcement, represented Ripple in the victory over the SEC. Don Verrilli, former U.S. Attorney General, argued more than 50 cases before the U.S. Supreme Court and represented Grayscale in its successful case against the SEC.
SEC Chairman Gary Gensler has consistently argued that decentralized exchanges are not truly decentralized and should fall under the regulator’s purview.
Gensler did too supported that many digital assets qualify as unregistered securities subject to SEC regulations. Uniswap Labs, in its response, argued that its governance token, UNI, does not meet the requirements of the Howey Test, a legal framework used to evaluate investment contracts.
The company also challenged the SEC’s classification of LP tokens, which are used as liquidity-providing securities in Uniswap pools. Uniswap Labs stated that LP tokens are accounting instruments rather than investment instruments.
Uniswap’s native token UNI saw significant gains by nearly 20% in the last 24 hours alone, as the market rebounded from a two-month period of consolidation to settle at $9.34.
Featured image from Shutterstock, chart from TradingView.com