SEC Clears Uniswap: A Win for DeFi

The US Securities and Exchange Commission (SEC) has officially closed its investigation into Uniswap Labs without taking enforcement action, as announced on February 25. The investigation, which spanned over three years, centered on allegations that Uniswap Labs operated as an unregistered broker, exchange, and clearing agency, and issued an unregistered security.

Uniswap Labs characterized the outcome as a victory for decentralized finance (DeFi), reinforcing the argument that decentralized technology operates within the legal framework. In April 2022, the SEC issued a Wells notice to Uniswap Labs, outlining potential charges based on claims that the firm engaged in unregistered securities activities. The investigation has now concluded, and no further legal action is planned.

Jake Chervinsky, chief legal officer at Variant Fund, congratulated Uniswap on receiving a "clean bill of health from the SEC," stating that it's a "travesty" that major crypto players waste time and resources fighting regulatory overreach. Following the news, Uniswap's governance token UNI jumped roughly 5% from $7.87 to $8.28.

Throughout the investigation, Uniswap Labs maintained its position that it does not operate as a broker, that the Uniswap Protocol does not constitute an exchange or clearing agency under US securities law, and that UNI is not a security. Hayden Adams, founder of Uniswap, criticized the SEC's initial approach, describing it as part of a broader pattern of regulatory enforcement applied arbitrarily to DeFi projects without clear legal grounding.

Adams argued that the SEC attempted to impose a regulatory framework designed for centralized financial institutions on decentralized networks, failing to recognize the structural differences between the two systems. He emphasized that self-custodied funds and self-executing smart contracts on public blockchains provide transparency not present in traditional finance (TradFi) markets, making existing regulatory approaches ill-suited for DeFi.

Adams expressed optimism about working with Congress and regulatory bodies to establish clear rules tailored to DeFi, noting that emerging regulatory perspectives within the SEC appear to be shifting toward a more constructive approach. However, he reiterated the need for regulatory frameworks that recognize the unique nature of decentralized financial technologies while promoting transparency, access, and innovation.