Uniswap Labs, the developer behind the Uniswap decentralized exchange, has once again urged the US Securities and Exchange Commission (SEC) to drop its proposal to regulate decentralized finance (DeFi), referencing a recent landmark Supreme Court decision.
Background on SEC’s Proposal
Since April 2023, the SEC has been pushing to expand the definition of what constitutes an exchange under the Exchange Act of 1934, aiming to include DeFi market participants. Uniswap Labs has been a vocal opponent of this proposal, arguing that the changes are unnecessary and overreaching.
Uniswap’s Arguments Against the Proposal
In a July 9 letter, Uniswap built upon previous arguments made in a June comment letter, urging the SEC to abandon its proposed amendments. The key point in Uniswap’s new argument revolves around the Chevron decision, stemming from the Supreme Court case Loper Bright Enterprises v. Raimondo on June 28. This decision removes the requirement for courts to defer to federal agencies when interpreting ambiguous laws.
Uniswap contends that the SEC’s efforts to redefine “exchange” would be futile, wasting resources on a definition that is unlikely to withstand judicial scrutiny. The Chevron decision strengthens Uniswap’s stance that the SEC’s interpretation of the Exchange Act stretches the statutory text too far.
Implications of the Proposed Amendments
Uniswap further argues that the SEC’s proposed amendments lack clear boundaries, leading to inconsistent enforcement and legal uncertainties. The absence of discernible limits in the amendment would force the SEC to litigate each case individually, creating confusion and inefficiency.
“For all of these reasons, the Commission should not adopt the proposed amendments,” Uniswap stated. “The Commission drafted the proposed amendments against a legal backdrop that no longer exists.”
Call for Reopening the Comment Period
Uniswap suggests that if the SEC chooses not to drop the amendments, it should at least reopen the public comment period. This would allow stakeholders to consider the implications of the Chevron decision and provide informed feedback.
In April, the SEC issued a Wells notice to Uniswap, signaling its intent to recommend enforcement action against the exchange. Uniswap responded in a blog post, criticizing the SEC’s legal arguments as “weak” and expressing readiness to challenge the matter in court if necessary.
