Decentralised exchange Uniswap is telling the U.S. Securities and Exchange Commission (SEC) to back off from regulating DeFi, pointing to a recent Supreme Court ruling that clips the wings of federal agencies.
In a letter sent to the SEC on Wednesday, Uniswap argued that the regulator’s attempt to bring DeFi under its umbrella is now on shaky legal ground.
Here’s the lowdown on this crypto-regulatory showdown:
- Uniswap cited the Supreme Court’s decision to overturn the Chevron doctrine
- The SEC proposed expanding the definition of an “exchange” in April 2023 to include DeFi protocols
- Uniswap claims the SEC’s proposal relies on a “staggeringly broad and unprecedented” interpretation of the Securities Exchange Act of 1934
- The DEX argues that courts are now “certain to conclude” that the SEC is stretching its statutory authority too far
- Uniswap itself is facing an SEC enforcement action, having received a Wells notice in April
“The SEC’s going to have a tough time defending its aggressive interpretation of its authority now,” says Tobi Opeyemi Amure, an analyst at Tradequotex.com. “This Chevron decision is also poking holes in how regulators like the SEC can operate, and it looks like Uniswap is wasting no time in using it to push back.”
The battle between Uniswap and the SEC is just heating up. At the heart of the matter is the SEC’s attempt to expand its reach into the DeFi industry. Last year, the regulator proposed broadening the definition of an “exchange” to rope in DeFi protocols like decentralized exchanges (DEXs).
SEC Chair Gary Gensler didn’t mince words when he announced the proposal, saying, “Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws.” It was a shot across the bow of the DeFi industry, and Uniswap is firing back.
Things changed last month when the highest court in the land dropped a bombshell by overturning the Chevron doctrine. This legal principle, which had been kicking around for 40 years, essentially gave federal agencies the benefit of the doubt when interpreting vague laws. It was a get-out-of-jail-free card for regulators looking to expand their authority.
But now? That card’s been torn up. The crypto industry was quick to celebrate the decision, seeing it as a potential roadblock to what they view as regulatory overreach. And Uniswap is wasting no time in wielding this new legal weapon.
In its letter to the SEC, Uniswap’s lawyers didn’t pull any punches. They argued that “there is now no realistic possibility that a court could uphold the proposed amendments if challenged.” In other words, they’re telling the SEC: your move is illegal, and now we’ve got the Supreme Court backing us up.
This isn’t the first time Uniswap and the SEC have butted heads. The DEX is currently staring down the barrel of an SEC enforcement action, having received a Wells notice in April. Uniswap’s chief legal officer, Marvin Ammori, didn’t mince words, calling it an “abuse of power” by the regulator.
