Uniswap Labs, the parent company behind the largest decentralised exchange on Ethereum, has settled charges that it illegally allowed trading of leveraged Bitcoin and Ether.

The company will pay a $175,000 penalty, according to the Commodity Futures Trading Commission. The regulator said it had levied a relatively light fine in recognition of Uniswap Labs’ “substantial cooperation.”

In the settlement, Uniswab Labs neither confirmed nor denied the allegations, but agreed it wouldn’t say anything to create “the impression that this Order is without a factual basis.”

Uniswap’s UNI token jumped 5% on the news before reversing some of its gains Wednesday.

Uniswap Labs is navigating a regulatory onslaught. Earlier this year, the company said it had received a Wells notice from the Securities and Exchange Commission, a warning the agency is about to file an enforcement action.

And New York Attorney General Letitia James has subpoenaed Andreessen Horowitz and Union Square Ventures, venture capital firms that invested in Uniswap Labs, CoinDesk reported Wednesday.

From 2021 through 2023, Uniswap Labs let users buy and sell tokens that represented leveraged positions in Bitcoin and Ether, according to the CFTC.

It did so by creating a website offering access to the Uniswap protocol, the regulator alleged.

“During the Relevant Period, Interface users transacted a notional value of approximately $21.5 million in trades involving Leveraged Tokens,” the CFTC noted.

Miles Jennings, general counsel at venture capital fund Andreessen Horowitz, applauded the settlement in an X post.

“Simple lesson we should have already learned — your frontend should comply with the laws of the jurisdiction where it’s facilitating conduct,” he wrote.

“The CFTC continues to focus on regulating apps/frontends, not protocols. On businesses, not software. Good.”

Meanwhile, CFTC commissioner Summer Mersinger, a frequent critic of the agency’s crypto enforcement, slammed the decision to pursue Uniswap in the first place.

“Through this settlement, the Commission appears to be taking the position that any DeFi platform could be liable for any and all conduct occurring on its protocol,” Mersinger wrote in a dissenting statement.

“Imagine if J. Edgar Hoover had charged Henry Ford with liability for the crimes of John Dillinger and Bonny and Clyde because the Ford V8 was central to their ability to commit crimes.”

In July, Uniswap Labs announced it had removed tokens from its interface, citing the “evolving regulatory landscape.”

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

Uniswap Labs did not immediately return DL News’ request for comment.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.