The recent action taken by the United States Securities and Exchange Commission (SEC) against decentralized crypto exchange Uniswap goes against its own policy guidelines, according to Adam Cochran, a partner at Cinneamhain Ventures. In his legal analysis on X (formerly Twitter), Cochran referred to previous decisions by the SEC regarding the definition of an exchange and its implications for Uniswap’s potential legal battle.
Cochran highlighted the SEC’s issuance of No-Action Letters in 1986, 1991, and 1997, which provided guidance to entities seeking clarification on routing and matching trades electronically. These entities were concerned that engaging in such activities would classify them as an “exchange.” Cochran argued that these precedents contradict the SEC’s current stance on Uniswap.
Another point of contradiction, according to Cochran, is the SEC’s guidance on the classification of front-ends as exchanges. Letters from 1989 and 1990 stated that an interface that displays and communicates with an exchange does not qualify as an exchange itself. Cochran explained that these interfaces were deemed not to be exchanges because the settlement and payment processes took place elsewhere.
Cochran also mentioned a 1998 SEC decision, in which the Commission declared that it would no longer respond to No-Action Letter requests, considering the matter settled. Furthermore, he pointed out that connecting buyers and sellers does not automatically constitute an exchange, as indicated by SEC guidance provided in 1979, 1996, and 1999.
Another aspect highlighted in Cochran’s analysis is the issue of asset listing. In 1998, the SEC determined that having an electronic system for common stocks not listed on an existing exchange does not qualify as an exchange, regardless of whether fees are charged.
Uniswap, known for enabling automated token exchanges on the Ethereum blockchain without traditional intermediaries, has faced regulatory scrutiny since 2021. On April 10, the platform received a Wells notice, indicating that the SEC’s staff intends to recommend enforcement action.
Uniswap Labs, the main developer behind Uniswap, has previously claimed that it is only responsible for developing the app’s front-end portal. The team argues that the front-end is separate from the autonomous Uniswap protocol, which is publicly available. Cochran’s analysis supports this claim, stating that the front-end and the smart contract are distinct elements in a crypto trade.
In a separate development, Trezor CEO claimed that the introduction of Bitcoin ETFs has made Coinbase an attractive target for hackers and governments.