SEC to sue Uniswap DEX amid DeFi regulatory crackdown

Decentralized finance (DeFi) exchange Uniswap has been formally notified by the Securities and Exchange Commission (SEC) of impending legal action, according to the protocol’s founder Hayden Adams.

The SEC’s move was signaled through a Wells Notice issued on Wednesday and it comes amidst the ongoing regulatory scrutiny facing the DeFi sector, often described by the SEC chairman as the industry’s “Wild West.”

Uniswap CEO Hayden Adams disclosed the receipt of the Wells notice via X, highlighting his reaction to the SEC’s impending action. “Not surprised, just annoyed, disappointed, and ready to fight,” Adams wrote.

“It’s been clear for a while that rather than working to create clear, informed rules, the SEC has decided to focus on attacking long-time good actors like Uniswap and Coinbase,” he stated.

Uniswap stands as the leading decentralized exchange (DEX) when it comes to daily trading volumes, holding a 22.5% market share. This surge in regulatory scrutiny arrives shortly after a comparable subpoena was sent to Uniswap’s competitor, SushiSwap, indicating an ongoing trend of increased regulatory attention on decentralized trading platforms.

The SEC has had its eye on the leading Ethereum decentralized exchange (DEX) for quite some time. Back in September 2021, the Wall Street Journal revealed that the regulator started digging into Uniswap Labs. They were curious about how this exchange lets users trade directly with each other, bypassing traditional middlemen, and also how it’s been pitched to American investors.

Marvin Aomori, Uniswap’s Chief Legal Officer, also took to X to comment on the SEC’s notice, describing it as “disappointing” but unsurprising given the current regulatory climate. “Today’s Wells notice against @Uniswap is disappointing, but is not unexpected from this SEC,” Aomori remarked.

A Wells notice is a procedural step by the SEC indicating its staff’s recommendation for enforcement action and offers the notice’s recipient a chance to argue against the proposed charges. This recent action against Uniswap follows a series of similar warnings and legal actions pursued by the SEC against major crypto exchanges, including Coinbase and Binance.