The latest action taken by the United States Securities and Exchange Commission (SEC) against decentralized crypto exchange Uniswap contradicts years of its own policy guidelines, according to Adam Cochran of Cinneamhain Ventures. In his legal analysis on X, Cochran highlighted previous decisions by the SEC regarding the definition of an exchange and its implications for Uniswap’s potential legal battle.
Cochran pointed out that the SEC has issued No-Action Letters in the past for entities seeking guidance on routing and matching trades electronically. These entities were concerned that such activities would classify them as an exchange. However, the SEC’s guidance at the time was that interfaces that display and communicate with an exchange are not exchanges themselves.
Furthermore, Cochran mentioned that in 1998, the SEC declared the matter settled and stopped responding to No-Action Letter requests. The SEC has also provided guidance stating that connecting buyers and sellers does not constitute an exchange.
Another significant point in Cochran’s analysis is the classification of asset listing. The SEC found in 1998 that having an electronic system for common stocks not listed on an existing exchange does not qualify as an exchange, regardless of any associated fees.
Uniswap, which facilitates automated token exchanges on the Ethereum blockchain without traditional intermediaries, has been under regulatory scrutiny since 2021. Recently, the platform received a Wells notice from the SEC, indicating that the regulator’s staff intends to recommend enforcement action.
Uniswap Labs, the main developer behind Uniswap, has stated that it is only responsible for developing the app’s front-end portal. According to the team, the front-end is separate from the autonomous code of the Uniswap protocol. Cochran’s analysis supports this claim, emphasizing that the front-end and smart contract are distinct elements in a crypto trade.
According to Cochran, the SEC’s actions against Uniswap go against its own previous guidance and create a contradiction in its policy approach.