Uniswap Labs Challenges the SEC Over DeFi Regulation

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The development team behind the distributed exchange Uniswap, Uni-wap Labs, has once more urged the US Securities and Exchange Commission (SEC) to revoke its plan to control decentralized finance (DeFi). A recent Supreme Court ruling that might greatly influence federal agency interpretation of statutes strengthens this plea.

Uniswap Targets the SEC

Explicitly targeting crypto market players within DeFi, the SEC has been pushing for a broad definition of “exchange” under the Exchange Act of 1934 since April 2023. Among other detractors, Uniswap has always opposed this suggested modification.

Uniswap strengthened its resistance in a letter dated July 9, drawing on claims made in a letter received last month. Uniswap’s main point of contention is the Supreme Court’s June 28 Chevron ruling from the Loper Bright Enterprises v. Raimondo case. This historic decision holds that when interpreting vague legislation, courts are no more bound to submit to government agencies.

Uniswap Presents Sound Arguments

Uniswap argues, given the Chevron ruling, the SEC’s quest of redefining “exchange” is a fruitless endeavor. They contend that because the proposed amendment was already likely to confront and fail a legal challenge even before the Supreme Court’s decision, such an effort would be a waste of the SEC’s resources.

“If the Commission proceeds with its proposed amendments, a reviewing court is sure to conclude that the Commission’s interpretation of the Exchange Act stretches the statutory text too far,” Uniswap said. They underlined that the lack of explicit boundaries in the amendment would result in inconsistent and vague legal direction, which calls for ongoing case-by- case litigation.

Pragmatic Ramifications

Uniswap also emphasized the pragmatic ramifications of the suggested SEC revisions. They contended that the scope of the amendment provides “no discernible limits” to the public, therefore producing a regulatory system that is challenging to understand and apply uniformly. This, claims Uniswap, emphasizes even more the need of the SEC changing its stance.

Rejecting the Proposed Changes

In its letter, Uniswap asked the SEC to totally reject the proposed changes. Alternatively, they advised the SEC to at least extend the public comment time so that the consequences of the recent Chevron ruling may be taken into account.

The background of this regulatory fight is a Wells notice the SEC sent Uniswap in April indicating staff intention to suggest enforcement action against the distributed exchange. In a later blog post, Uniswap claimed to be ready to challenge the matter in court should needed and attacked the SEC’s legal justification for the Wells notice as “weak.”

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