US CFTC orders Uniswap Labs to pay $175K fine on charges related to derivatives trading
The Commodity Futures Trading Commission (CFTC) today announced an order filing and settling charges against Uniswap Labs.
.@CFTC Issues Order Against Uniswap Labs for Offering Illegal Digital Asset Derivatives Trading: https://t.co/Io0VP7c18U
— CFTC (@CFTC) September 4, 2024
The company behind the Ethereum decentralized exchange Uniswap, Uniswap Labs, has been hit with an order by U.S. regulator the Commodity Futures Trading Commission (CFTC) for allegedly offering illegal digital asset derivatives trading.
According to a statement by the U.S. Commodity Futures Trading Commission on Wednesday, a filing and settlement order was made today against Universal Navigation Inc. d/b/a Uniswap Labs, a Delaware company with its headquarters in New York, by the U.S. regulator as part of its ongoing enforcement focus in the digital asset decentralized finance (DeFi) space.
By using a decentralized digital asset trading protocol, Uniswap Labs unlawfully provided leveraged or margined retail commodity transactions in digital assets, according to the order. In addition to being ordered to stop and desist from violating the Commodity Exchange Act (CEA), Uniswap Labs is required to pay a $175,000 civil monetary penalty.
Ian McGinley, Director of Enforcement, said that DeFi operators need to be vigilant to make sure that all transactions adhere to the law. McGinley stated that the action taken today against Unisawp proves yet again the Division of Enforcement will vigorously enforce the CEA as DeFi ecosystems and digital asset platforms evolve.
A blockchain-based digital asset protocol that allowed institutional users and non-Eligible Contract Participants to trade digital assets using the Ethereum blockchain was developed and implemented with assistance from Uniswap Labs. Liquidity pools, which consist of matched pairs of digital assets that are valued relative to one another, can be created and traded by protocol users.
Uniswap Labs created and maintained a web interface that users could access in order to make the protocol easier to use. Users could trade in hundreds of liquidity pools on the protocol via the interface. A restricted quantity of leveraged tokens, which gave users leveraged exposure to digital assets like Ether and Bitcoin, were among the digital assets traded on the protocol and via the interface.
The order determines that these leveraged tokens are commodities transactions that are leveraged or margined and that did not result in an actual delivery within 28 days. As a result, these tokens can only be offered to non-eligible contract participants on a board of trade that the CFTC has designated or registered as a contract market—Uniswap Labs was not one of these boards.
In the form of a reduced civil monetary penalty, as specified in the order, the CFTC acknowledges Uniswap Labs' significant cooperation with the Division of Enforcement's investigation of this matter.
Additionally, Uniswap Labs may be subject to a Securities and Exchange Commission (SEC) enforcement action. The firm said it was served with a Wells Notice by the SEC in April, a sign that the agency believed it had sufficient evidence to file a lawsuit.
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