The United States Commodity Futures Trading Commission (CFTC) charged decentralized exchange (DEX) developer Uniswap Labs with illegally offering leveraged cryptocurrency trading to US retail investors.
CFTC Charges
According to a September 4 announcement, Uniswap Labs agreed to settle the charges by paying a $175,000 civil penalty and ceasing violations of the Commodity Exchange Act (CEA). Ian McGinley, the CFTC's director of enforcement, stated that the agency will vigorously enforce the CEA as digital asset platforms and DeFi ecosystems evolve. 'DeFi operators must be vigilant to ensure that transactions comply with the law,' added McGinley.
CFTC Commissioner's Opinion
Summer Mersinger, one of the CFTC's five commissioners, objected to the agency's handling of the enforcement action in a September 4 statement, describing the approach as 'regulation through enforcement.' 'I hoped that the Commission would consider rulemaking, or at least guidance, making it clear how DeFi protocols could comply with them,' Mersinger said. 'Unfortunately, today is not that day.' Mersinger also noted that Uniswap has already halted trading on the leveraged tokens that triggered the CFTC action, such as the BTC 2x Flexible Leverage Index token and the ETH 2x Flexible Leverage Index token.
SEC's Reaction and Uniswap's Status
The CFTC regulates commodity derivatives products and generally does not oversee spot commodity markets or securities. Among the 'hundreds of liquidity pools on the protocol [...] were a limited number of leveraged tokens,' which qualify as 'leveraged or margined commodity transactions' under the CFTC's jurisdiction. US Securities and Exchange Commission (SEC) Chair Gary Gensler has argued that 'the vast majority' of digital assets are securities under US law. In April, the SEC alleged that Uniswap Labs is operating an unregistered securities exchange. In May, Uniswap responded, describing itself as a software company that 'reimagines market structures' and not a securities exchange. Uniswap is among the most popular DeFi protocols, facilitating token swaps on more than a dozen blockchain networks. As of September 4, Uniswap held upwards of $4.3 billion in total value locked (TVL).
The situation with Uniswap underscores the importance of regulatory compliance for DeFi operators and demonstrates that regulators continue to closely monitor this sector.
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