SEC to Sue Uniswap Labs; Team is "Ready to Fight"

The U.S. Securities and Exchange Commission is preparing to sue Uniswap Labs, the company building on the largest decentralized exchange by volume of the same name, according to a tweet by founder Hayden Adams.

The SEC's enforcement division sent Uniswap a Wells notice on Wednesday. A Wells notice indicates that the SEC staff has decided to bring an enforcement action against a person or firm, and provides them with the opportunity to provide information and submit a written statement.

"I’m not surprised. Just annoyed, disappointed, and ready to fight," Adams said on X.

The protocol's UNI token dropped 6% on the news at around 3pm ET.

It's unclear what the SEC is charging Uniswap Labs with. The SEC has previously sued centralized crypto exchanges Coinbase and Binance, alleging that they operate as an exchange, broker and clearinghouse for securities, without the necessary approvals from the agency.

Right Side of the Law

Uniswap Labs argued in a blog post that the SEC only has jurisdiction over securities and that secondary market transactions in digital assets generally do not constitute investment contracts. Also, the post said, the "Uniswap Protocol, web app, and wallet would still not meet the legal definitions of securities exchange or broker," as ruled in the SEC's case against Coinbase.

Finally, the post says, Uniswap's UNI token "is not a security because it does not meet the legal definition of any type of security, including not meeting the definition of an 'investment contract."

The agency has brought enforcement actions against DeFi platforms before. In the regulators' first lawsuit in the sector, it charged lender DeFi Money Market for offering and selling securities in unregistered offerings.

This would be one of the agencies' most high-profile cases in crypto, as the Uniswap protocol enables billions in daily volume, with $16 billion traded on the platform in the past seven days, according to DeFiLlama.

The Uniswap team said in its post that it's confident "our products are on the right side of the law, and that our work is on the right side of history."