Commissioner Summer K. Mersinger has strongly opposed the Commodity Futures Trading Commission’s (CFTC) decision to fine Uniswap Labs $175,000 for illegal trading in digital asset derivatives.
In her dissent, Mersinger criticized the agency’s reliance on “regulation by enforcement,” arguing that this approach threatens to stifle innovation in DeFi and drive developers out of the US.
She added:
‘This case exhibits the hallmarks of regulation through enforcement.’ “Rather than providing clarity on DeFi protocols, we are punishing those who try to comply.”
Enforcement measures
The CFTC’s enforcement action targeted Uniswap Labs for its role in facilitating trading through its decentralized exchange (DEX). The protocol allows users to create liquidity pools to trade pairs of digital assets, including leveraged tokens.
These tokens provide exposure to price movements of assets such as Bitcoin and Ethereum and allow users to trade with leverage, increasing potential profits and risks.
According to the CFTC, the leveraged digital asset transactions executed on the Uniswap DEX constituted retail commodity contracts, which under U.S. law must be executed on a registered contract market.
Uniswap had not registered its platform with the CFTC, which led to the violation. The order also found that these transactions did not result in actual delivery of the assets within 28 days, further reinforcing the need for regulatory oversight.
As part of the settlement, Uniswap Labs agreed to pay a $175,000 fine and refrain from further violations of the CEA. The CFTC acknowledged that Uniswap had cooperated with the investigation, which contributed to the reduced fine.
The DeFi platform is also facing regulatory action from the SEC, which recently issued a Wells Notice against the company.
Concerns about innovation
Mersinger’s dissent warned that the CFTC’s approach could push responsible DeFi developers abroad, leaving behind actors less concerned about regulatory compliance.
She highlighted that Uniswap Labs had taken steps to block certain leveraged tokens following a previous enforcement action by the CFTC, but that the current settlement still penalized the company for actions before these blocks were implemented.
According to Mersinger:
“This settlement sets a precedent that could deter innovation and compliance.”
She called on the CFTC to engage in regulations that provide clearer guidance for DeFi platforms, rather than relying solely on enforcement actions.
The Uniswap Labs settlement highlights the ongoing debate over how regulators should approach the rapidly evolving DeFi sector. While the CFTC has taken an enforcement-oriented approach, voices like Mersinger suggest that a more collaborative regulatory framework may be necessary to promote innovation while ensuring compliance.
