Uniswap Labs fined by CFTC following allegations of offering illegal crypto derivative services

• CFTC issued a filing and settling charge against Uniswap Labs. 
• The filing orders Uniswap Labs to pay $175,000 as a civil monetary penalty fee.
• Commissioner Summer Mersinger disagreed with the CFTC's charges, slamming the "regulation by enforcement" approach.

Uniswap Labs (UNI) received a $175,000 fine from the Commodity and Futures Trading Commission (CFTC) on Wednesday after the regulator issued a filing and settling charge against the decentralized exchange.

Uniswap Labs hit with $175,000 fine

Uniswap Labs, the team behind decentralized exchange (DEX) Uniswap, received an order from the CFTC accusing them of violating the Commodity Exchange Act (CEA). In a report on Wednesday, the CFTC alleged that Uniswap engaged in offering leveraged or margined retail commodity transactions using digital assets.

The regulator stated that Uniswap Labs permitted the trading of digital assets through hundreds of liquidity pools made available through a web platform. These liquidity pools provided exposure to leveraged assets such as Bitcoin (BTC) and Ethereum (ETH), which Uniswap Labs ought to have registered as contract markets with the CFTC.

Accordingly, Uniswap Labs is required to pay a civil monetary penalty fee of $175,000 and desist from violating the CEA. The report added that Uniswap Labs has been fully cooperative as they complied with the regulator's Division of Enforcement throughout the investigation.

Meanwhile, CFTC Commissioner Summer Mersinger argued against the regulator's actions, claiming that the case "has all the hallmarks of what we have come to know as regulation through enforcement."

Mersinger stated that the CFTC's charges against Uniswap Labs have little connection with the alleged offense. She went on to state that regulators need to start taking progressive approaches to violations rather than placing enforcement first.

"Using our enforcement authorities against DeFi protocols instead of providing clarity through notice-and-comment rulemaking risks driving responsible DeFi developers overseas to create businesses, jobs, and economic activity away from the United States," Mersinger stated.

Additionally, Mersinger added that the priorities for this case are misaligned. She claims that Uniswap did not act as a liquidity provider, collect trading fees, or extend credit. She also stated that no customers have been affected by the services provided nor labeled allegations of fraud against the DeFi protocol.

Uniswap Labs had previously announced that it received a Wells notice from the Securities and Exchange Commission (SEC) in April, in which the agency alleged that it may be facilitating the illegal trading of securities.