Uniswap Labs has issued a firm rebuttal to the SEC's Wells notice, asserting that the agency's attempts to regulate DeFi are misguided and legally unsound.

In a blog post on May 20, the company expressed confidence in prevailing if compelled to litigate against the SEC, stating:

"We're confident in our position and believe that history will prove us right. The SEC's resources would be better spent elsewhere."

This response comes amid a broader dispute over the future of financial technology and market regulation.

Legally unfounded

Uniswap Labs criticized the SEC's endeavors to extend its authority over communications technology and digital markets, arguing that the agency's legal arguments are weak and have been consistently debunked in court.

The company stated:

"We urge the SEC to embrace open-source technology that enhances outdated commercial and financial systems instead of attempting to stifle innovation through litigation."

It also emphasized that the Uniswap Protocol aligns with the SEC's mission to safeguard investors and uphold fair, orderly, and efficient markets.

Uniswap Labs defended the Uniswap DEX as a significant market innovation that enables users to transact directly without relying on centralized intermediaries. It highlighted that the protocol, operating autonomously and facilitating $2 trillion in trading volume without any security breaches, offers transparent, low-cost, and efficient trading accessible globally 24/7.

Comparable to a standard file format

In its comprehensive response to the Wells notice, Uniswap Labs refuted the SEC's assertions that the protocol functions as an unregistered securities exchange and that the UNI token constitutes an investment contract.

It argued that the ERC-20 token standard it supports is akin to a "standard file format for all forms of value."

The company explained:

"A token serves as a file format, similar to a PDF. The Protocol is a general-purpose computer program accessible for anyone to use and integrate, much like TCP/IP."

Uniswap Labs further contended that even if some securities transactions occur on its protocol, the vast majority of transactions involve Ethereum, wrapped Bitcoin, stablecoins, and memecoins.

The SEC's argument that Uniswap is an exchange controlled by Uniswap Labs and that its interface acts as an unregistered broker-dealer was challenged by Uniswap Labs, which asserted that these claims equate a digital file format with a security based on incorrect assumptions.

The company pointed out that the UNI token was distributed to thousands of users without any expectation of profit from the DEX's performance, thus failing to meet the criteria required by the Howey Test.

Uniswap's confidence in prevailing

Marvin Ammori, Uniswap Labs' CLO, expressed confidence in Uniswap's position, stating:

"We have a robust case, and if litigation ensues, we are confident of success."

He asserted that Uniswap Labs' case is so strong that the SEC is attempting to change the law. Additionally, Ammori mentioned that courts have dismissed similar arguments against Coinbase, finding that self-custodial wallets do not meet the requirements to be a broker.

Uniswap Labs has enlisted the legal expertise of Andrew Ceresney, former SEC enforcement head, and Don Verrilli, former US Solicitor General, who successfully represented Ripple and Grayscale against the SEC, respectively.

The SEC issued a Wells notice to Uniswap Labs on April 10, indicating the Enforcement Division's intention to recommend legal action against the firm.

In recent weeks, the SEC has also issued Wells notices to the Ethereum development firm Consensys and the retail brokerage Robinhood.

However, the SEC has yet to initiate anticipated lawsuits against these three firms. Consensys has responded with a preemptive lawsuit.