SEC breaks from past policy guidelines in Uniswap crackdown

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The United States Securities and Exchange Commission (SEC) is contradicting years of its ain argumentation guidelines successful the latest enactment against decentralized crypto speech Uniswap, said Cinneamhain Ventures’ Adam Cochran. 

In a ineligible investigation connected X (formerly Twitter), Cochran referred to respective erstwhile decisions by the U.S. regulator implicit the explanation of an speech and what it means for Uniswap’s imaginable ineligible battle.

Source: Adam Cochran

The SEC has antecedently issued No-Action Letters successful 1986, 1991, and 1997 for entities seeking guidance connected routing and matching trades electronically. According to Cochran, the entities were “looking to found their archetypal strategy for routing and matching trades electronically. They were acrophobic that would marque them an “exchange.”

“But the SEC concluded that due to the fact that the execution was connected a abstracted strategy that matching, routing, communicating and ordering arsenic a “computer work system” did not conscionable the holistic explanation of “an exchange.”

Another precedent that contradicts the SEC relates to the classification of front-ends arsenic an exchange. The regulator’s guidance successful letters from 1989 and 1990 was that an interface that displays and communicates with an speech is not successful itself an exchange.

“The SEC guidance recovered that due to the fact that these interfaces, adjacent though they profited from bringing unneurotic buyers and sellers to speech explicit securities the information that the colony and outgo happened elsewhere meant these interfaces were not exchanges,” explained the task capitalist.

Source: Adam Cochran

Cochran besides noted that successful 1998, connected the SEC No-Act. LEXIS 18, the Commission declared the substance settled and would nary longer respond to No-Action Letter requests.

In addition, connecting buyers and sellers does nconstitute an exchange. The SEC provided this guidance to companies successful 1979, 1996 and 1999, according to Cochran’s analysis.

“The speech needed to impact the ineligible transportation of the assets and/or finances. So adjacent though a purchaser connected Uniswap whitethorn perpetrate to a purchase, by signing a transaction with their backstage cardinal the Uniswap Labs frontend, isn’t what’s settling it.”

Another applicable constituent successful the investigation concerns plus listing. In 1998, the Commission recovered that having an physics strategy for communal stocks that are not listed connected an existing speech does not represent an exchange, careless of whether fees are charged.

“In this case, the committee recovered that erstwhile again, truthful agelong arsenic their informational interface was nary clearing and settling these transactions, past conscionable due to the fact that it was the superior listing determination of an asset, it was not someway much of an exchange.”

SEC’s Wells notice

Uniswap enables automated token exchanges connected the Ethereum blockchain, allowing users to swap aggregate crypto tokens without utilizing accepted intermediaries.

Uniswap Labs, Uniswap’s main developer, has been nether regulatory scrutiny since 2021. On April 10, however, the level was served a Wells announcement — a ceremonial notification that the regulator’s unit intends to urge enforcement action.

Uniswap Labs antecedently claimed that lone the bundle developer is liable for gathering the app’s front-end portal. According to Uniswap, the front-end is abstracted from the Uniswap protocol itself, which is autonomous codification released for nationalist use.

Cochran’s investigation backs up these claims. According to him, the front-end and the astute declaration are abstracted elements successful a crypto trade.

“In fact, we cognize these elements are distinct, due to the fact that you tin execute trades connected the astute declaration done different interfaces (like Etherscan oregon swap aggregators), oregon adjacent straight done a node.”

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