Uniswap Labs has issued a defiant response to the SEC’s Wells notice, asserting the agency’s attempts to regulate DeFi are misguided and legally unsound.
The company said in a May 20 blog post that it is confident it will come out victorious if forced into litigation by the SEC. Uniswap Labs said:
“We’re confident that our work is on the right side of history. The SEC should not devote its taxpayer-funded resources to bringing a case against us.”
The response comes amid a broader clash over the future of financial technology and market regulation.
Legally unsound
Uniswap Labs criticized the SEC’s efforts to expand its jurisdiction over communications technology and digital markets, claiming the agency’s legal arguments are weak and have been repeatedly refuted in court.
The company said:
“We believe the SEC should embrace open-source technology that improves on outdated commercial and financial systems instead of attempting to litigate it out of existence.”
It also highlighted that the Uniswap Protocol aligns with the SEC’s mission to protect investors and maintain fair, orderly, and efficient markets.
Uniswap Labs defended the Uniswap DEX as a major market innovation that has enabled users to transact directly without relying on centralized intermediaries. It added that the protocol — which operates autonomously and has facilitated $2 trillion in trading volume without a single hack — offers transparent, low-cost, and efficient trading accessible globally 24/7.
Akin to a PDF file
In its complete Wells response, Uniswap Labs rejected the SEC’s assertions that the protocol is an unregistered securities exchange and that the UNI token constitutes an investment contract.
It argued that the ERC-20 token standard it supports is a “general file format for all forms of value.”
The company stated:
“A token is a file format, like a PDF. The Protocol is a general purpose computer program that anyone can use and integrate, like TCP/IP.”
Uniswap Labs added that, even if the SEC is correct that some securities transactions occur on its protocol, the protocol is “almost exclusively used for non-securities transactions” involving Ethereum, wrapped Bitcoin, stablecoins, and memecoins.
The SEC has argued that Uniswap is an exchange controlled by Uniswap Labs and that its interface acts as an unregistered broker-dealer.
However, Uniswap Labs argues that the SEC’s position is based on incorrect assumptions and contends that these claims wrongly equate a digital file format with a security.
The company said the UNI token was airdropped to thousands of users without the expectation of profit from the DEX’s performance, which implies that it does not meet the criteria required by the Howey Test.
Uniswap confident in victory
Uniswap Labs CLO Marvin Ammori expressed confidence in Uniswap’s stance, stating on X:
“We have a very strong case. If forced to litigate, we will win.”
He asserted that Uniswap Labs’ case is “so strong that the SEC is trying to change the law.” In addition to describing the file formats argument, Amorri said the SEC is working to redefine “exchange” and other terms beyond their current meaning.
He said that courts have dismissed similar arguments against Coinbase by finding that self-custodial wallets do not meet the requirements to be a broker.
Uniswap Labs has hired lawyers who have won two high-profile cases, including former SEC enforcement head Andrew Ceresney and former US Solicitor General Don Verrilli.
The two lawyers represented Ripple and Grayscale against the SEC, respectively.
The SEC issued a Wells notice to Uniswap Labs on April 10, which indicated that the SEC’s Enforcement Division intended to recommend a lawsuit against the firm.
In recent weeks, the SEC has also filed Wells notices against the Ethereum development firm Consensys and the retail brokerage Robinhood.
The SEC has not yet initiated the expected lawsuits against the three firms. Consensys alone has responded with a preemptive lawsuit.