Uniswap Labs challenges the US Securities and Exchange Commission’s (SEC) efforts to broaden the definition of a crypto ‘exchange’ to include decentralized finance (DeFi) platforms. The company argues against this in a letter to the SEC, incorporating recent Supreme Court rulings that could impact the application and enforceability of such regulatory expansions.

Uniswap Engages with SEC

Katherine Minarik, Chief Legal Officer of Uniswap Labs, highlighted the company’s stance in a post on X, referencing a recent US Supreme Court decision that rejects the use of Chevron deference in federal agency rulemaking. Minarik expressed, “The SEC’s proposal was flawed even with that deference — and it’s all the more so under today’s standard.”

Today @Uniswap Labs urged the SEC not to proceed with its proposed rulemaking that would expand the definition of an ‘exchange’ to include DeFi and more. 1/x

— Katherine Minarik (@MinarikLaw) July 9, 2024

The Chevron deference, a principle allowing courts to defer to a federal agency’s interpretation of an unclear statute within its domain, was a significant factor. A recent case ruling demonstrated that federal agencies must adhere more closely to statutory text, which may impact the SEC’s ongoing enforcement actions in the crypto industry.

In its letter, Uniswap Labs outlines its opposition to the SEC’s proposition to modify the definition of a crypto “exchange” within the Securities Exchange Act of 1934. Currently, an exchange is defined as “a marketplace for matching securities buyers and sellers.” The proposed changes aim to broaden this to encompass not only traditional trading platforms but also decentralized protocols like Uniswap.

The letter asserts that the SEC’s expanded definition lacks support in the Exchange Act’s statutory language. It argues that including decentralized networks and technologies exceeds the Act’s boundaries and could face legal challenges based on recent court rulings, potentially leading to an “unlawful rule.”

Uniswap mentions two recent court cases, SEC vs. Binance Holdings and SEC vs. Coinbase, where judges questioned the SEC’s approach to regulating the crypto industry through enforcement rather than clear rules. This reflects the resistance to applying conventional securities laws to decentralized crypto market aspects.

The correspondence urges the SEC to reconsider the Loper Bright decision’s impact and reopen the comment period for its proposal. This would enable additional industry input in light of the altered legal landscape post-decision.

At the moment, UNI is trading at $8.24.