The U.S. Securities and Exchange Commission (SEC) is facing criticism for its recent enforcement actions against the decentralized crypto exchange Uniswap, which seem to deviate from its own historical guidelines.
Adam Cochran of Cinneamhain Ventures has pointed out these inconsistencies, drawing from multiple precedents in SEC’s own archives.
Historically, the SEC has issued “No-Action Letters” indicating a more flexible interpretation of what constitutes an exchange.
Notable instances include 1986, 1991, and 1997 when entities seeking to establish electronic systems for routing and matching trades were not classified as exchanges.
“But the SEC concluded that because the execution was on a separate system that matching, routing, communicating and ordering as a ‘computer service system’ did not meet the holistic definition of ‘an exchange,'” Cochran explained, referencing the SEC’s past decisions.
Further, Cochran highlighted instances in 1989 and 1990 when the SEC differentiated front-end interfaces from exchanges.
“The SEC guidance found that because these interfaces, even though they profited from bringing together buyers and sellers to exchange explicit securities the fact that the settlement and payment happened elsewhere meant these interfaces were not exchanges,” Cochran elaborated.
In 1998, the SEC appeared to settle this issue definitively in its No-Action Letter LEXIS 18 by deciding it would no longer entertain requests for such clarifications.
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Cochran’s review also included guidance from 1979, 1996, and 1999 which asserted that merely connecting buyers and sellers does not an exchange make, emphasizing that “The exchange needed to involve the legal transfer of the assets and/or finances.
So even though a buyer on Uniswap may commit to a purchase, by signing a transaction with their private key the Uniswap Labs frontend, isn’t what’s settling it.”
Additionally, Cochran mentioned a 1998 SEC finding that an electronic system serving as a primary listing location for unlisted common stocks does not qualify as an exchange if it does not clear and settle transactions.
“In this case, the commission found that once again, so long as their informational interface was no clearing and settling these transactions, then just because it was the primary listing location of an asset, it was not somehow more of an exchange.”
Despite this backdrop, Uniswap Labs has been under the SEC’s lens since 2021, culminating in a Wells notice on April 10, indicating potential enforcement.
Uniswap Labs has defended its position by asserting that it merely developed the front-end portal of the app, distinct from the Uniswap protocol—a self-executing code made public.
Cochran supports this view, clarifying, “In fact, we know these elements are distinct, because you can execute trades on the smart contract through other interfaces (like Etherscan or swap aggregators), or even directly through a node.”
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