Uniswap nosedives 16% on news of Wells notice
Uniswap‘s token UNI has dropped 17% following a lawsuit notice from US regulators sinking to $9.27, its lowest since late February.
The latest decline coincided with the exchange receiving an official investigation Wells notice from the SEC.
The market cap of UNI token saw a 17% loss in the hours since the news broke, with the token now trading at $5.54 million, according to data from CoinMarketCap.
Uniswap Labs founder Hayden Adams expressed his frustration and readiness to contest the SEC’s action foreseeing a lengthy legal battle that could reach the Supreme Court.
Uniswap contends that UNI does not constitute a security and thus falls outside the regulatory scope of a securities exchange or broker, a stance outlined in a recent blog post without detailing the Wells notice.
Bill Hughes, Consensys’ Senior Counsel and Director of Regulatory Matters discussed the process required for the SEC to officially file a lawsuit, noting that approval from the agency’s five commissioners is necessary.
“We all know that the Chair wants to sue them, and two commissioners are NOT going to disagree, and two will disagree,” Hughes wrote. “So a suit is a foregone conclusion, but there isn’t a suit yet.”
He also advised the community to remain calm, emphasizing the unlikelihood of the SEC targeting UNI holders or users directly.
Former SEC internet enforcement chief John Reed Stark criticized Uniswap’s public reaction to the Wells notice as counterproductive, emphasizing that aggressive defense strategies against the SEC typically fail.
“Any SEC lawyer will agree that responding to a Wells by berating the SEC, calling them names, etc. is a weak, risky and losing strategy.”
The broader context of this legal challenge reflects ongoing tensions between the SEC and the cryptocurrency industry. The sector has accused the SEC of overreach and lack of clear regulatory guidelines, while SEC Chairman Gary Gensler and supporters, including Sen. Elizabeth Warren, maintain that the industry is seeking exemptions from established securities laws.
This context is shaped by other notable lawsuits involving Coinbase and Ripple, focusing on the SEC’s digital assets jurisdiction. Outcomes have been mixed, with recent rulings favoring the SEC, but Uniswap’s defense remains uncertain given defi’s peculiarities and its past legal victory in a class-action lawsuit.
The controversy occurs as defi has seen significant growth, with Uniswap facilitating over $2 trillion in transactions and attracting interest from traditional finance sectors.
A recent legal decision in the SEC’s case against Coinbase highlighted distinctions in the regulatory treatment of decentralized services, which may bolster Uniswap’s defense despite concerns over its control over certain platform features.
