Uniswap Labs to Pay $175k to Settle CFTC Charges

TL;DR

• Uniswap Labs has agreed to settle charges it offered illegal leveraged and margined commodities transactions.

• The crypto firm will pay the CFTC $175,000 to settle the charges.

Uniswap Labs to Settle Illegal Margin Products Charges with the CFTC

The U.S. Commodity Futures Trading Commission announced on Wednesday that Uniswap Labs will pay $175,000 to settle charges it offered illegal leveraged and margined commodities transactions.

According to the regulator, Uniswap Labs developed a user interface and a set of smart contracts that allowed users to trade tokens on its platform. The tokens offered include those developed by third parties, exposing investors to margined or leveraged returns against bitcoin (BTC) and ether (ETH) prices.

The CFTC said,

“The Commodity Futures Trading Commission, as part of its continuing enforcement focus in the digital asset decentralized finance (DeFi) space, today issued an order filing and settling charges against Universal Navigation Inc. d/b/a Uniswap Labs, a Delaware company based in New York. The order finds Uniswap Labs illegally offered leveraged or margined retail commodity transactions in digital assets via a decentralized digital asset trading protocol. The order requires Uniswap Labs to pay a $175,000 civil monetary penalty and to cease and desist from violating the Commodity Exchange Act (CEA), as charged.”

According to the CFTC, during the relevant period, the tokens traded on Uniswap through the interface included a limited number of leveraged tokens, which provided users with approximately 2:1 leveraged exposure to digital assets like BTC and ETH. 

Uniswap Chief Legal Officer Katherine Minarik stated that,

"Today, Uniswap Labs resolved a CFTC investigation, about a small fraction of a percent of trading through our interface related to a handful of tokens, for a $175k fine in a standard no admit-no deny settlement. We remain singularly focused on building the future of DeFi for everyone and taking on the fights necessary to make that happen."

The regulator added that Uniswap did not register with it as a designated contract market and was not allowed to offer leveraged trading products as a result. 

While commenting on this latest development, CFTC Commissioner Summer Mersinger said,

"This case has all the hallmarks of what we have come to know as regulation through enforcement: A settlement with a de minimis penalty that bears little relationship to the conduct alleged, sweeping statements about the broader industry that are not germane to the case at hand, and legal theories that have not been tested in court."

In addition to the CFTC, Uniswap Labs is also facing a potential enforcement action from the Securities and Exchange Commission (SEC). In April, Uniswap Labs received a Wells Notice indicating that the regulator intends to bring charges against them.