- The U.S. CFTC has issued a penalty order against Uniswap Labs for illegal involvement in leveraged retail commodity trading.
- Uniswap Labs allowed U.S. users to trade leveraged tokens without proper authorization, violating regulatory rules.
- The company must pay a $175,000 fine and immediately stop the illegal activities.
The U.S. Commodity Futures Trading Commission (CFTC) has issued a penalty order against Uniswap Labs, alleging illegal involvement in leveraged or margined retail commodity trading through its decentralized digital asset protocol.
According to the CFTC, Uniswap Labs allowed U.S. users to trade leveraged tokens without proper authorization, leading to regulatory violations. As a result, the company is now required to pay a fine of $175,000 and halt the illegal activities immediately.
Uniswap Labs, operating under the name Universal Navigation Inc., is a Delaware-based company with headquarters in New York. The company played a key role in the development and deployment of a decentralized protocol that allowed users to trade digital assets on the Ethereum blockchain.
This protocol provided access to liquidity pools, enabling users to trade a variety of digital asset pairs. Among these assets were leveraged tokens, which gave users leveraged exposure to popular cryptocurrencies like Ether and Bitcoin.
Uniswap Labs Found Involved in Illegal Commodity Transactions
The CFTC’s investigation revealed that the leveraged tokens traded through Uniswap’s protocol did not result in actual delivery within 28 days, as required by law. Because these transactions fell under the category of leveraged or margined commodity transactions, they could only be offered on a properly designated or registered board of trade. Uniswap Labs lacked such registration, leading to its violation of the Commodity Exchange Act (CEA).
Ian McGinley, the CFTC’s Director of Enforcement, emphasized the importance of compliance in the evolving DeFi ecosystem, stating that this case highlights the commission’s dedication to enforcing the law in the rapidly growing digital asset space.
He said in a press statement:
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.
In this case, the CFTC acknowledged Uniswap Labs’ significant cooperation during the investigation, which played a part in the reduced penalty. The fine serves as a reminder that compliance with regulatory standards is essential, even in decentralized financial ecosystems. Uniswap Labs has now agreed to cease all activities that violate the CEA, ending this chapter of regulatory scrutiny.
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