Uniswap Cites Ripple Victory in Response to SEC Wells Notice

Decentralized exchange Uniswap references the victory secured by Ripple in the SEC case to challenge the agency’s litigation intent.

Uniswap has responded to the SEC’s Wells Notice with a firm stance, citing Ripple’s legal triumph. In July 2023, Ripple secured a partial victory when Judge Analisa Torres ruled that XRP is not a security on its own. This landmark decision has become a beacon for other crypto entities facing regulatory scrutiny.

Uniswap Challenges the SEC’s Oversight

Uniswap’s retort to the SEC’s allegations was that the decentralized finance (DeFi) sector should be nurtured, not stifled by litigation. In a blog post Tuesday, they argue that the Uniswap protocol, which facilitates peer-to-peer transactions without intermediaries, aligns with the SEC’s own mission to protect investors and ensure market integrity.

The crux of Uniswap’s argument is the nature of its protocol – a self-sustaining software that has processed over $2 trillion in trades without a single security breach. This, they claim, is a testament to the protocol’s robustness and its contribution to creating a more efficient and transparent market system.

Uniswap criticized the SEC’s expansive strategy for regulating cryptocurrencies, arguing that the agency’s legal interpretations are excessive and have been rejected by courts in the past. Additionally, they foresee backing from Congress through a proposed bill that would transfer the regulation of digital assets to the Commodity Futures Trading Commission (CFTC).

By month end, the U.S. House of Representatives is expected to vote on the FIT21 Act. This legislation aims to clarify the regulatory framework for crypto assets, designating oversight to either the CFTC or the SEC based on the assets’ decentralization, in an effort to address regulatory ambiguity.

SEC Allegedly Riding on Regulatory Uncertainty 

The SEC has asserted itself as the main regulator of the crypto industry, despite ongoing regulatory uncertainty. In its Wells Notice to Uniswap, the securities regulator classifies the exchange as an unregistered securities exchange and its UNI token as an unregistered security offering.

Uniswap counters this by likening their protocol to general-purpose technologies like TCP/IP and their token to a mere digital file format, not a security. In its reply, the exchange’s legal team cites rulings from the SEC and Ripple case to dismiss the SEC’s claims. 

Notably, while the SEC and Ripple have enjoyed split victories in the case, most of the rulings countered their claims against Ripple. Some firms have cited these rulings, with Terra founder Do Kwon leveraging them in his own battle with the SEC.

The Uniswap team is poised for battle also, bolstered by a track record of victories in high-profile cases against the SEC, with one involving Andrew Ceresney who represented Ripple in the SEC lawsuit. They noted readiness to defend the right to innovate and distribute technology that compels traditional systems to evolve.

This clash is part of the SEC’s broader enforcement efforts against crypto firms, including Binance and Coinbase. Robinhood also received a Wells Notice this month. The SEC is actively pursuing alleged securities law violations to regulate the growing crypto market.