Uniswap settles charges with the CFTC for offering illegal leveraged cryptocurrency trading to US investors, agreeing to a $175,000 penalty and regulatory compliance.
The U.S. Commodity Futures Trading Commission (CFTC) has taken action against Uniswap Labs, the developer behind the decentralized exchange (DEX), for allegedly offering illegal cryptocurrency derivatives trading to U.S. retail investors. As announced on September 4, Uniswap agreed to settle the charges by paying a $175,000 civil penalty and ceasing activities that violate the Commodity Exchange Act (CEA).
Ian McGinley, the CFTC’s Director of Enforcement, emphasized that the agency will continue to enforce the CEA as digital assets and decentralized finance (DeFi) platforms evolve. He warned DeFi operators to ensure their transactions comply with existing laws.
However, not all CFTC commissioners were in agreement with the enforcement approach. Commissioner Summer Mersinger voiced her concerns, labeling the action as “regulation through enforcement” and hoping for clearer rules to guide DeFi protocols in the future. She also noted that Uniswap had already halted trading on the specific leveraged tokens at the center of the CFTC’s charges, including the BTC 2x Flexible Leverage Index token (BTC2XFLI) and the ETH 2x Flexible Leverage Index token (ETH2XFLI).
Additionally, Commissioner Caroline Pham dissented, arguing that the CFTC’s decision may violate the Administrative Procedure Act (APA) by not engaging in proper rulemaking. Pham questioned the legitimacy of charging Uniswap solely based on the word “leveraged” appearing in the names of the tokens.
While the CFTC focuses on regulating commodity derivatives, the U.S. Securities and Exchange Commission (SEC) continues to assert that most digital assets qualify as securities. Earlier in 2023, the SEC accused Uniswap of operating an unregistered securities exchange. Uniswap, however, maintains that it is a software company reimagining market structures, not a securities platform.
As one of the leading DeFi protocols, Uniswap facilitates token swaps across more than a dozen blockchain networks and held over $4.3 billion in total value locked (TVL) as of September 4, according to DefiLlama.
