The CFTC has charged Uniswap for offering leveraged retail commodity transactions in cryptocurrencies on its decentralized exchange.
The Commodity Futures Trading Commission (CFTC), a United States regulator focused on decentralized finance (DeFi), has charged Uniswap Labs, the Delaware-based company behind the Uniswap decentralized crypto exchange, with offering illegal margin or leveraged transactions on its platform. The agency requires Uniswap Labs to pay a civil monetary penalty and stop going against the Commodity Exchange Act (CEA) Laws.
Uniswap to Pay $175,000
The CFTC announced on Wednesday that Uniswap Labs will pay $175,000 for illegally offering leveraged or margined retail commodity transactions in digital assets on a decentralized crypto asset trading protocol.
Commenting on the matter, CFTC’s Director of Enforcement Ian McGinley said:
“Today’s action demonstrates once again the Division of Enforcement will vigorously enforce the CEA as digital asset platforms and DeFi ecosystems evolve. DeFi operators must be vigilant to ensure that transactions comply with the law.”
According to the regulator, Uniswap Labs allowed the development and deployment of a blockchain-based protocol that allowed unqualified contract participants and users globally to trade various crypto assets through the Ethereum blockchain. The platform enables users to create and deal with liquidity pools.
Additionally, Uniswap Labs created an interface that allowed users to trade in hundreds of liquidity pools across the protocol, including leveraged tokens and crypto assets like Bitcoin and Ether.
A liquidity pool is a shared pool of assets deposited by various users and locked on a smart contract to enable seamless transactions.
As shown in the order, the leveraged tokens can be offered to “non-eligible contract participants only on a board of trade that has been registered under the CFTC as a contract market.” However, Uniswap was not registered as a contract market.
Uniswap Labs Reacts to Charges
As revealed by the CFTC, the company took a proactive approach to the matter by complying directly with the enforcement team. This avoided any further legal complications and reputational damage, leading to a more effective outcome.
Considering a few factors, including Uniswap Labs’ considerable cooperation with the Division of Enforcement when the case was raised, the regulator reduced its monetary penalty to $175,000, highlighting to other firms the importance of calm compliance with regulatory laws.
The Uniswap Labs token, UNI, did not react significantly to the announcement. It dropped by about 3.8% and has retraced to its regular price range. According to live price data from CryptocurrenciesToWatch, the token trades at $6.51, signaling a 6.4% price increase within 24 hours.