CFTC charges Uniswap Labs for illegal crypto derivatives trading, imposes $175,000 penalty

Mila September 4, 2024

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Key Takeaways

CFTC fined Uniswap Labs $175,000 for illegally offering crypto derivatives trading.
Uniswap Labs’ leveraged tokens were deemed unauthorized commodity transactions by the CFTC.

The US Commodity Futures Trading Commission (CFTC) has issued an order against Uniswap Labs for allegedly illegally offering crypto derivatives through tokens equivalent to leveraged positions.

According to a CFTC statement, the exchange has been fined $175,000 and ordered to cease and desist from violating the Commodity Exchange Act.

The US regulator stated that Uniswap Labs developed and deployed a blockchain-based digital asset protocol allowing users to trade in liquidity pools of digital assets. The company’s web interface enabled access to hundreds of these pools, including leveraged tokens providing exposure to crypto like Ethereum (ETH) and Bitcoin (BTC).

The CFTC found these leveraged tokens to be commodity transactions that did not result in actual delivery within 28 days. Such offerings to non-Eligible Contract Participants are only permissible on CFTC-registered contract markets, which Uniswap Labs was not, the statement added.

“Today’s action demonstrates once again the Division of Enforcement will vigorously enforce the CEA as digital asset platforms and DeFi ecosystems evolve. DeFi operators must be vigilant to ensure that transactions comply with the law,” Ian McGinley, Director of Enforcement at CFTC, stated.

The CFTC acknowledged Uniswap Labs’ cooperation during the investigation, resulting in a reduced civil monetary penalty.

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Regulatory pressure in 2024

In April this year, Uniswap Labs received a Wells notice from the US Securities and Exchange Commission (SEC). The regulator threatened enforcement action against the entity behind the decentralized exchange, accusing it of offering unregistered securities.

At the occasion, Hayden Adams, CEO of Uniswap Labs, showed confidence that their operations are under regulatory compliance and that their work “is on the right side of history.”

Moreover, he accused the SEC of letting “bad actors like FTX” slip by while targeting good actors, namely Uniswap and Coinbase.