According to Bloomberg, a New York-based startup has recently contested allegations that it operates as an unregistered exchange and broker dealer. The company, Uniswap Labs, responded to the Securities and Exchange Commission (SEC) on Tuesday, arguing that the SEC's case is based on the incorrect assumption that all tokens are securities. Uniswap Labs stated that if the SEC were to sue them for operating as an unregistered exchange, it would risk a negative decision regarding its authority over crypto tokens. This could potentially limit the definition of 'exchange' in a way that could undermine the SEC's pending rulemaking in this area.
In their 40-page response, Uniswap Labs declared their readiness to litigate if necessary, expressing confidence in their potential victory. They argued that their UNI tokens, which serve as the governance token for Uniswap, do not qualify as securities. This is because their token distributions do not meet the requirements of the Howey Test, a legal framework that defines investment contracts based on a Supreme Court ruling.
Furthermore, Uniswap Labs disputed the SEC's claim that LP tokens, a special type of token a user receives when they invest money into a pool on Uniswap to facilitate trading of different tokens, are securities. The company explained that LP tokens are used as a bookkeeping device to track the assets provided by the user to the smart contract and any fees earned on the user's liquidity. They emphasized that LP tokens are issued not for investment purposes, but as accounting tools, and therefore, they are not securities.