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DeFi platform Uniswap’s token UNI fell to its lowest level in six weeks after the platform announced it had received a legal notice, suggesting it was prepared for a lawsuit from United States regulators. Following Uniswap’s announcement of receiving a Wells notice from the Securities and Exchange Commission, UNI dropped from $11.21 to $10 within an hour, a notification that the regulator may be planning an enforcement action.
What Awaits Uniswap?
According to Tradingview data, UNI is currently trading at $9.66, its lowest point since the end of February. Hayden Adams, the founder of New York-based Uniswap Labs, shared his thoughts in a post dated April 10:
“This battle could last for years and may even reach the Supreme Court.”
Uniswap did not disclose the full content of the Wells notice but claimed in a blog post related to the notice that UNI is not a security and does not meet the legal definitions of a securities exchange or broker in the US. Bill Hughes, a senior advisor and director of regulatory affairs at Consensys, wrote a post explaining that SEC staff must get the case approved by all five commission members of the agency, including Chairman Gary Gensler:
“We all know that the chairman wants to sue them, and two commission members will not agree, and two will agree. So, filing a lawsuit is an inevitable outcome, but there is no case yet.”
Notable Figures Weigh In
Calls for calm have been made, suggesting it is highly unlikely that the SEC will target UNI holders or protocol users. John Reed Stark, former Chief of the SEC’s Office of Internet Enforcement, wrote that a Wells notice gives the recipient a chance to discuss why the commission members should reject a proposed lawsuit. He expressed his surprise at the recipients of Wells notices who respond by throwing stones at the SEC with offensive PR campaigns, like Uniswap has initiated:
“Any SEC lawyer will admit that responding to a Wells with insults, name-calling, etc., is a weak, risky, and losing strategy.”
Gabriel Shapiro, former general counsel at Delphi Labs, wrote that the SEC might win on securities issues related to UNI but would lose if it claimed Uniswap was a securities exchange. Paul Grewal, chief legal officer of Coinbase, which was sued by the SEC, agreed with Shapiro, writing that the SEC would not be able to defend its claim if it alleged Uniswap was a broker. He pointed to a ruling last month in the SEC’s case against Coinbase, which determined that the SEC could not claim Coinbase conducted brokerage activities through its decentralized Coinbase Wallet.
