Report: SEC Investigating DeFi Exchange Developer Uniswap Labs

Under scrutiny is how the exchange is marketed, according to an unnamed source cited in the Wall Street Journal.

article-image

Source: Shutterstock

share

key takeaways

  • Uniswap told the Wall Street Journal that it is committed to complying with laws and regulations and providing information to regulators to assist with “any inquiry”
  • Just last month SEC chairman Gary Gensler said he was prioritizing a crackdown on cryptocurrency platforms with a focus on crypto trading, lending and DeFi platforms

According to a report from the Wall Street Journal, the Securities and Exchange Commission is investigating Uniswap Labs, the startup developer behind the world’s largest decentralized exchange, Uniswap.

The SEC is investigating how Uniswap Labs markets itself, according to an unnamed source cited in the report. 

Uniswap Labs told the Wall Street Journal that it is committed to complying with laws and regulations and providing information to regulators to assist with “any inquiry.” 

“The SEC does not comment on the existence or nonexistence of a possible investigation,” a spokesperson for the agency told Blockworks.

Asaf Meir, CEO at crypto risk monitoring firm Solidus Labs, said that while crypto and DeFi markets are changing the way trading works, they are also creating new risks and new ways to manipulate trading and harm investors. 

“The SEC’s foremost concern is investor protection, and the integrity of markets operated in the US,” he told Blockworks. “It’s likely looking to get a better insight into activity in DeFi markets to assess what actions are needed, guide future regulation efforts and take action to protect investors.”

Unlike three or four years ago, there’s a general acceptance in the crypto space that compliance and regulation is necessary for the industry to fulfil its potential, the CEO added.

“This reported investigation is a strong message that for DeFi markets as well, enforcement is imminent, and it won’t be an ‘ask for forgiveness rather than permission’ scenario,” Meir explained. “If you want to grow as a DeFi service provider, you have to take risk monitoring and compliance seriously right now, rather than in a year.”

SEC makes good on DeFi crackdown promises

Just last month SEC chairman Gary Gensler said he was prioritizing a crackdown on cryptocurrency platforms with a focus on crypto trading, lending and DeFi platforms.

“Generally, folks buying these tokens are anticipating profits, and there’s a small group of entrepreneurs and technologists standing up and nurturing the projects,” Gensler said in August. “I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight. This leaves prices open to manipulation.”

“There’s dozens of platforms that say, ‘come here, lend us your crypto,’” Gensler said then. “You can go online right now and find some that are touting 4% returns, 7% returns, 9% returns. …Who is looking after the investors as to those — are they good-faith actors that are really there, are they Ponzi schemes or are they somewhere in the middle?”

According to Gensler, “right now, large parts of the field of crypto are … not operating within regulatory frameworks that protect investors and consumers, guard against illicit activity, ensure for financial stability, and yes, protect national security,” he said. “…If this innovation has any chance of surviving into the late 2020s and 2030s, it can’t stay astride the public policy.”

What is a decentralized exchange?

A decentralized exchange, or DEX, is a peer-to-peer exchange for digital assets where users can transact without an intermediary.

Exchange rules are governed by smart contracts, and the transactions occur automatically with parties agreeing to send a small percentage of the value of the exchange to a liquidity pool which facilitates the trade. 

With a DEX, there is no centralized custody or engine driving order placement. While there are developers that provide updates and quality assurance to the underlying code, there’s minimal corporate and regulatory structure or capital intensive operations. Instead, DEXs are governed by users who have a democratic influence thanks to governance tokens which let them decide the direction the platform takes, Blockworks previously reported.

The Wall Street Journal reported that the SEC investigation is in its early stages and may not find any wrongdoing.

This story was updated with contributions from Ben Strack on September 3, 2021, at 11:32 am ET.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Flashnote Template Presentation (2).jpg

Research

With the recent election, it’s clear that there will be a meaningful shift in crypto regulations and legislation. Trump is likely as pro-crypto as a president can be. He launched (multiple) of his own NFT collections and is launching an Aave wrapper called World Liberty Fi. He has also spoken out and mentioned that he wants to make the United States "the crypto capital of the planet" and transform it into the "Bitcoin superpower of the world". He proposed creating a strategic national Bitcoin stockpile alongside support from Senator Cynthia Lummis, promising to retain 100% of all Bitcoin held by the U.S. government. More importantly, we’re likely to see deregulation across the board in a lot of industries, with crypto being one of them - as Trump has committed to keeping the crypto market largely unregulated. Crypto, DeFi in particular, has historically been knee-capped by overreaching and hostile governmental agencies and regulation by enforcement, as evidenced by the plethora of Wells notices and lawsuits over the past few years. With Donald Trump winning the presidency, Republicans taking control of the Senate, and being on the verge of securing the House, we think it’s likely that crypto realizes positive regulatory clarity. Below, you can find our analysts’ takes:

article-image

Solana is the crowd favorite to potentially flip Ethereum somewhere down the line, and it tends to feel realistic at times

article-image

Of course, a lot has happened since the 600+ survey respondents shared their thoughts between Aug. 15 and Oct. 1

article-image

AI’s future shouldn’t be decided by a handful of tech giants

article-image

A look at software wallet Exodus may show how an SEC shakeup could have a real impact on industry companies

article-image

Co-chairing Trump’s transition team to help fill administration positions is Cantor Fitzgerald CEO Howard Lutnick

article-image

Reflect is a delta-neutral currency protocol that lets tokens accrue yield without touching the banking system