On 4 September 2024, the Commodity Futures Trading Commission (CFTC) issued an order against Uniswap Labs, also known as Universal Navigation Inc., based in New York. According to the CFTC, the company allegedly engaged in the illegal offering of leveraged or margined retail commodity transactions in digital assets through a decentralized trading protocol. T
As part of the settlement, Uniswap Labs will pay a civil monetary penalty of $175,000 and has been ordered to cease and desist from any future alleged violations of the Commodity Exchange Act (CEA). The CFTC’s Director of Enforcement, Ian McGinley, emphasized that the agency remains committed to enforcing existing laws within the evolving digital asset and DeFi markets, ensuring that platforms comply with the regulations that govern retail commodity transactions.
The CFTC’s press release describes how Uniswap Labs was instrumental in developing and deploying a decentralised protocol operating on the Ethereum blockchain. This protocol allows users in the United States and abroad to trade digital assets by creating and engaging with liquidity pools where pairs of digital assets are traded and valued against each other.
Through a web interface created and maintained by Uniswap Labs, users could access hundreds of liquidity pools and engage in digital asset trading. Among the assets available for trading on the protocol were certain leveraged tokens that gave users leveraged exposure to digital assets such as Bitcoin and Ether. The CFTC alleges that these leveraged tokens involved margined or leveraged retail commodity transactions that did not result in actual delivery within the required 28-day period. The CFTC asserts that such transactions are subject to regulation and can only be offered on a board of trade designated or registered by the CFTC as a contract market—something Uniswap Labs allegedly failed to do.
The CFTC further claims that these leveraged tokens were made available to non-Eligible Contract Participants (i.e., individuals and entities that do not meet specific financial thresholds) and institutional users, both in the U.S. and internationally, without the proper regulatory oversight. This alleged violation of the CEA prompted the CFTC to take enforcement action.
While the CFTC pursued charges related to these alleged violations, it also recognized Uniswap Labs’ cooperation throughout the investigation. Due to the company’s substantial assistance, the CFTC reduced the civil monetary penalty imposed on Uniswap Labs, which could have been significantly higher under different circumstances. The fine was set at $175,000 as part of the settlement agreement, reflecting the company’s willingness to cooperate with the investigation.
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