CFTC Charges Uniswap Labs for Illegal Derivatives Trading
The U.S. Commodity Futures Trading Commission (CFTC) has filed and settled charges against Uniswap Labs for $175,000 related to the firm’s offering of “illegal digital asset derivatives trading.”
CFTC’s Stance on Enforcement
CFTC Director of Enforcement Ian McGinley stated, “Today’s action demonstrates once again the Division of Enforcement will vigorously enforce the CEA (Commodity Exchange Act) as digital asset platforms and DeFi ecosystems evolve. DeFi operators must be vigilant to ensure that transactions comply with the law.”
Uniswap Labs previously received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), which claimed in May that Uniswap acted as an unregistered securities exchange and broker-dealer.
Details of Charges
According to the CFTC, Uniswap Labs facilitated trading of digital assets through a protocol on the Ethereum blockchain. This protocol allowed the creation and trading of liquidity pools comprising paired digital assets. Users could also trade leveraged tokens for ether and bitcoin. These leveraged tokens were created by a third party unrelated to Uniswap Labs.
The CFTC found that Uniswap Labs violated commodities laws due to improper registration. The order stated that these leveraged tokens qualify as leveraged or margined commodity transactions that are only permissible on a CFTC-designated contract market, which Uniswap is not.
Commodities Debate
The authority asserted that both bitcoin and ether are commodities, but the status of ether, as either a security or commodity, has been a matter of debate. CFTC Chair Rostin Behnam views ether as a commodity, while SEC’s stance remains ambiguous.
Uniswap Labs did not admit or deny the CFTC’s findings. The agency acknowledged the firm’s cooperation, which influenced the fine amount.
Katherine Minarik, Uniswap’s chief legal officer, expressed relief at resolving the matter, stating that the case pertained to a small percentage of trading involving a few tokens.
New York Attorney General’s Subpoenas
On the same day, reports emerged of New York State Attorney General Letitia James sending subpoenas to venture capital firms like Andreessen Horowitz and Union Square Ventures concerning their investments in Uniswap.
Criticism from CFTC Commissioners
CFTC’s Republican commissioners criticized the agency’s enforcement actions. Commissioner Summer Mersinger described the charges as “regulation through enforcement” and warned that this could stifle DeFi innovation in the U.S.
Mersinger expressed hope that the CFTC would eventually create clearer guidelines for DeFi compliance. Meanwhile, Commissioner Caroline Pham argued that the agency’s action might violate the Administrative Procedures Act and emphasized the need for a more constructive regulatory approach to DeFi.
Pham acknowledged possible fraudulent conduct in DeFi but clarified that this case was not about those issues. She advocated for the CFTC to focus on prosecuting fraud rather than hastily asserting jurisdiction over DeFi.
Updates
- Update: Sept. 4, 4:35 p.m. UTC to include details throughout
- Update: Sept. 4, 5:35 p.m. UTC to include report from CoinDesk
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