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Uniswap Fires Back at SEC’s Wells Notice, Calls Out ‘Weak’ Legal Arguments

On Tuesday, Uniswap Labs submitted a comprehensive 40-page rebuttal to the SEC’s Wells Notice, pushing back against the potential litigation and advocating for the agency to dismiss the case.

This move follows the SEC’s recent expression of concerns regarding the possibility that Uniswap’s activities might contravene US securities regulations. In response, the decentralized cryptocurrency exchange is now providing a thorough explanation as to why the SEC’s position may be flawed.

Uniswap functions as a decentralized finance (DeFi) platform, catering to a diverse user base including developers, traders, and liquidity providers. However, the SEC has asserted that Uniswap Protocol operates as an unregistered securities exchange under the control of Uniswap Labs. Additionally, the SEC has characterized the Uniswap interface as an unregistered securities broker-dealer, and has labeled the UNI token as an investment contract.

SEC Should Not Waste Taxpayer Money on This Case: Uniswap

Uniswap fired back, asserting that the SEC’s legal claims are “feeble” and have been countered by previous court decisions.

The cryptocurrency platform contended that the agency is stretching the definitions of securities, exchanges, and contracts beyond reason. It further argued that the SEC’s allegations rely on the notion that any value stored in digital form could be categorized as a security.

“We firmly believe that our endeavors align with the correct trajectory of history,” Uniswap stated. “The SEC ought not to allocate taxpayer-funded resources toward pursuing a case against us.”

Most Users Outside SEC’s Jurisdiction, Uniswap Claims

Uniswap put forth the argument that the majority of trading activity on its platform doesn’t involve securities, even when evaluated by the SEC’s own criteria. Notably, it highlighted that a significant portion (65%) of its trading volume revolves around assets acknowledged by the SEC itself as non-securities, such as Ether, wrapped Bitcoin, and stablecoins.

Moreover, the protocol emphasized that US securities laws would not be applicable to the majority of its users, estimating that 75% of them are based outside the US.

Regarding any potential security-like transactions on its platform, Uniswap maintained that it does not constitute a securities exchange. It contended that a court would not interpret it as such, particularly because the platform was not explicitly designed for such transactions.

The federal regulatory body has taken a proactive approach, issuing Wells notices, initiating lawsuits, and reaching settlements with numerous cryptocurrency firms. Its attention has shifted notably towards Ethereum and DeFi entities, with ShapeShift, TradeStation, Uniswap, Consensys, and reportedly even the Ethereum Foundation, facing legal scrutiny.

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Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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