SEC Issues Wells Notice to Uniswap Decentralized Exchange

The United States Securities and Exchange Commission (SEC) has issued a Wells notice to Uniswap, a decentralized exchange (DEX) known for enabling automated token exchanges on the Ethereum blockchain. 

Marvin Ammori, Uniswap’s chief legal officer, confirmed the notice on X (formerly Twitter) on April 10, expressing disappointment but not surprise given the SEC’s stance on self-custodial, non-intermediated products.

Additionally, the DEX also published a blog post to slam the SEC’s actions, stating that the regulator is targeting “even the best actors building technology on blockchains.” The agency has been called out for not laying down the rules and regulations that it expects exchanges to follow.

Uniswap Receives Wells Notice from Uniswap

A Wells notice serves as a formal notification from the SEC to a company or individual, indicating the regulator’s intent to recommend enforcement action. 

It provides the recipient with an opportunity to present a written defense, known as a “Wells submission,” to contest the proposed action.

Uniswap Labs, the main developer behind Uniswap, has been under SEC investigation since 2021. The DEX has faced growing regulatory scrutiny and has previously delisted certain tokens from its platform due to these pressures.

Uniswap Claps Back at the SEC

In its defense, Uniswap Labs has argued that it is merely a software developer responsible for building the front-end portal to the app. The front-end, it claims, is separate from the Uniswap protocol itself, which operates as autonomous code released for public use.

Marvin Ammori emphasized that the Uniswap Protocol, web app, and wallet do not meet the legal definitions of securities exchange or broker. 

He stressed the importance of clear regulations for the crypto industry in the U.S., advocating for a transparent rule of law rather than arbitrary enforcement and abuse of power.

“We are confident that the products we offer are not just legal – they are transformative. They empower people across the world by enabling transparent, verifiable markets with fewer gatekeepers, which allows for cheap, accessible, global economic participation,” read the blog post.

Similar Actions Taken by the SEC

This isn’t the first time the SEC has taken action against crypto entities. Similar notices have been issued in the past to warn of legal actions against major crypto exchanges like Coinbase and Binance.

While the U.S. SEC pursues regulatory action, the European Union is also making strides in regulating decentralized finance (DeFi) protocols through its Markets in Crypto-Assets (MiCA) regulation. 

The MiCA regulation aims to address various aspects of the crypto market, including DeFi protocols and their front-ends. By December 30, 2024, the EU regulator is expected to prepare a report assessing the feasibility of specific regulations for the DeFi market, particularly focusing on decentralized systems without clear issuers or service providers.