Is Uniswap selling unregistered securities?

Two US law firms have filed a lawsuit against Uniswap, accusing the decentralised exchange and its backers of “violating the securities laws by promoting and selling securities in the form of digital tokens,” including well-known VC firms like A16z and Paradigm.

The case, filed by Kim & Serritella LLP and Barton LLP, seeks to bring victims like Risley, who have lost money on Uniswap since last April, into a class action lawsuit against the platform’s founders and developers. It claimed that Uniswap neglected to provide “registration statements,” which included information about the risk of the assets they were selling to users.

Uniswap Labs is also accused of allowing illegal actions such as “pump and dump” and “rug pulls” to take place on its platform, according to the class action. One of the most serious charges is that the DEX’s pricing structure encourages fraud by paying liquidity providers a part of the cost for each trade, according to the statement.

Meanwhile, Uniswap collects fees from developers and retains a share of those fees. Because of the competing interests, Uniswap could be seen as a covert facilitator of scams.

The case mentioned above isn’t the first to question DeFi technologies’ decentralised nature. In January, a software engineer called Joseph Kent filed a legal challenge against PoolTogether, a gamified crypto savings protocol. Kent stated that the network’s practice is effectively a type of lottery, which is illegal under New York law.

The SEC launched an inquiry into Uniswap Labs in September of last year, with the goal of determining how customers used the exchange, how it was advertised, and how it operated in general. Gary Gensler, the chairman of the Securities and Exchange Commission, had previously expressed concerns about DeFi protocols, which he believed may be classed as the types of companies the Commission regulates.

Read more: Uniswap boosts Web3 development through a new venture arm