In a significant regulatory move, the United States Commodity Futures Trading Commission (CFTC) has charged decentralized exchange (DEX) developer Uniswap Labs with facilitating illegal leveraged cryptocurrency trading for U.S. retail investors. This development was announced on Sept. 4, following an agreement between the two parties. Uniswap Labs has consented to the CFTC’s order, which imposes a $175,000 civil penalty and mandates that the decentralized finance (DeFi) developer comply with the Commodity Exchange Act (CEA).
According to Ian McGinley, director of enforcement at the CFTC, the agency will continue to rigorously enforce the CEA as the digital asset and DeFi sectors evolve. “DeFi operators must be vigilant to ensure that transactions comply with the law,” he stated in the official announcement.
Uniswap is a major player in the DeFi ecosystem, managing over $4.3 billion in total value across various blockchain networks, according to DefiLlama.
One CFTC commissioner, Summer Mersinger, voiced dissent over the agency’s approach to handling the case. In a Sept. 4 statement, Mersinger criticized the enforcement action, characterizing it as “regulation through enforcement.” She expressed disappointment that the CFTC had not yet established clear rules or guidance on how DeFi protocols could ensure compliance.
Despite Mersinger’s concerns, the CFTC emphasized that the specific tokens involved in the violations, including the BTC2XFLI and ETH2XFLI leveraged tokens, have already been removed from trading by Uniswap. These tokens were created by Index Coop, a DeFi protocol specializing in leveraged yield strategies.
The CFTC has jurisdiction over commodity derivatives but generally does not oversee spot commodity markets or securities. The leveraged tokens in question qualify as “leveraged or margined commodity transactions,” bringing them under the agency’s purview.
This action against Uniswap follows another recent regulatory push by the U.S. Securities and Exchange Commission (SEC), which has argued that most digital assets qualify as securities under U.S. law. Earlier this year, the SEC accused Uniswap Labs of operating an unregistered securities exchange, though Uniswap maintains it is simply a software company that seeks to reimagine market structures.
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