{"id":148576,"date":"2023-09-02T10:33:08","date_gmt":"2023-09-02T05:03:08","guid":{"rendered":"https:\/\/dripp.zone\/news\/?p=148576"},"modified":"2023-09-02T10:33:08","modified_gmt":"2023-09-02T05:03:08","slug":"uniswap-ruling-creates-regulatory-anomaly-for-defi-legal-scholar-crypto-news","status":"publish","type":"post","link":"https:\/\/dripp.zone\/news\/uniswap-ruling-creates-regulatory-anomaly-for-defi-legal-scholar-crypto-news\/","title":{"rendered":"Uniswap Ruling Creates Regulatory ‘Anomaly’ for DeFi: Legal Scholar – Crypto News"},"content":{"rendered":"
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As the crypto industry weathers what advocates say are oceans of regulatory uncertainty in the United States, a district judge\u2019s ruling earlier this week dove into decentralized finance (DeFi<\/a>), and may have calmed the waters for protocols like Uniswap.<\/span><\/p>\n

Tossing out a class action lawsuit on Wednesday, Southern District of New York Judge Katherine Polk Failla <\/span>found<\/span><\/a> that Uniswap\u2019s investors and developers were not liable under federal securities laws for so-called scam tokens that burned a trader.<\/span><\/p>\n

In the decision, she parsed how the permissionless nature of projects powered by automated smart contracts<\/a> creates situations where decentralized exchanges should be viewed differently from centralized ones, such as Kraken or Coinbase.<\/span><\/p>\n

In the case of Uniswap, it was the respective issuers of such tokens that wrote the code to create them and make them tradable via\u00a0<\/span>liquidity pools<\/span><\/a>. Because of that, it\u2019s a group of pseudonymous developers who are actually at fault, Failla said\u2014not Uniswap Labs.\u00a0<\/span><\/p>\n

According to Jack Graves, a Professor at Syracuse University College of Law, the ruling suggests that companies that exercise judgment over which tokens are listed on their platforms could be on the hook for token issuers\u2019 wrongdoings. But that means DeFi, as its permissionless nature means that anyone can list any token, sails free.<\/span><\/p>\n

\u201cIf you’re Coinbase, and you actually try to protect people who are trading, you’re subject to securities laws,\u201d he told <\/span>Decrypt<\/span><\/i>. \u201cBut if you are Uniswap Labs, and you design something that is truly decentralized, it’s the Wild West.\u201d<\/span><\/p>\n

The Securities Exchange Commission (SEC) claimed earlier this year that several cryptocurrencies traded on Coinbase\u2019s platform are <\/span>unregistered securities<\/span><\/a>. It specifically called out prominent coins like Solana<\/a> (SOL) and Polygon<\/a> (MATIC) as examples of offerings that make Coinbase a non-compliant company.<\/span><\/p>\n

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In court, Coinbase has <\/span>argued<\/span><\/a> that \u201cnone of the tokens\u201d flagged by the SEC qualify as a security, and that the company stands by its review process.<\/span><\/p>\n

More than 90% of the assets reviewed by the company don\u2019t get listed, according to Coinbase Chief Legal Officer Paul Grewal. \u201cCoinbase has rejected hundreds and hundreds of assets,\u201d he wrote in a <\/span>blog post<\/span><\/a>.<\/span><\/p>\n

Meanwhile, any person can create a token that\u2019s listed on decentralized exchanges\u2014part of the permissionless ethos that underpins DeFi as a whole.<\/span><\/p>\n

Graves described the newfound regulatory gulf between Coinbase and Uniswap as a \u201cstrange kind of anomaly.\u201d It resonates with DeFi\u2019s code-is-law spirit, but he said one could also argue it\u2019s a \u201cbackward result\u201d in terms of protecting investors.<\/span><\/p>\n

Regardless, Failla\u2019s ruling will make it more challenging for the SEC to pursue enforcement actions against exchanges that are truly decentralized, a quality laid out by Failla across several facts in the case of Uniswap, Graves added.\u00a0<\/span><\/p>\n

However, in her decision, the district judge noted that the intersection of federal securities law and DeFi transactions is far from defined.<\/span><\/p>\n

\u201cWhatever concerns DeFi transactions engender, the law is currently developing around these exchanges,\u201d she wrote. \u201cRegulators may someday address this gray area.\u201d<\/span><\/p>\n

While the gears of government turn slowly, there have been DeFi-related movements of late. A bill in Congress was <\/span>proposed<\/span><\/a> in July that would give the U.S. Treasury Department authority over DeFi, and the SEC <\/span>said<\/span><\/a> in April it would modify the definition of what constitutes an exchange to cover DeFi.\u00a0<\/span><\/p>\n

\u201cMake no mistake: Many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws,\u201d Gensler said of DeFi at the time. \u201cInvestors in the crypto markets must receive the same time-tested protections that the securities laws provide in all other markets.\u201d<\/span><\/p>\n

As a body of case law develops around DeFi and potential action from Congress looms out on the horizon, regulatory tides could shift. But, for the time being, Failla\u2019s decision demarcates DeFi from centralized crypto exchanges and acknowledges the technical nuances at play.<\/span><\/p>\n

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As the crypto industry weathers what advocates say are oceans of regulatory uncertainty in the United States, a district judge\u2019s ruling earlier this week dove into decentralized finance (DeFi), and may have calmed the waters for protocols like Uniswap. Tossing out a class action lawsuit on Wednesday, Southern District of New York Judge Katherine Polk […]<\/p>\n","protected":false},"author":2,"featured_media":148577,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[230,225,221,227,226,228,229,60,223,224,222],"class_list":["post-148576","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-brave","tag-coinbase","tag-crypto","tag-decentralised","tag-decentralized","tag-decentralized-exchange","tag-erc-20","tag-featured","tag-meme-coin","tag-robinhood","tag-solana"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/148576","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=148576"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/148576\/revisions"}],"predecessor-version":[{"id":148579,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/148576\/revisions\/148579"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/148577"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=148576"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=148576"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=148576"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}