Decentralized exchange (DEX) Uniswap has urged the U.S. Securities and Exchange Commission (SEC) to abandon its proposal to regulate the decentralized finance (DeFi) space, citing the U.S. Supreme Court's recent ruling on Chevron deference.
In a letter sent to the SEC Wednesday, lawyers for Uniswap argued that, "for better or worse—the Commission will not be able to claim the benefit of Chevron deference to defend its aggressive and atextual interpretation of its statutory authority."
The SEC proposed to expand the definition of an exchange in April last year, bringing DeFi protocols such as DEXs under its jurisdiction. In a press release accompanying the announcement, SEC Chair Gary Gensler said that, "Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws."
In its Wednesday letter, Uniswap argued that the SEC's proposal relied on a "staggeringly broad and unprecedented" reading of the Securities Exchange Act of 1934, and that the regulator was exceeding its statutory authority.
What is Chevron deference?
Last month, the Supreme Court ruled to abolish "Chevron deference," a longstanding doctrine that gave administrative agencies under the President the authority to interpret certain laws left vague by Congress.
Uniswap's lawyers cited the Supreme Court ruling in their letter to the SEC, arguing that, "there is now no realistic possibility that a court could uphold the proposed amendments if challenged," and that the legal backdrop under which the SEC had drafted its proposed amendment has been "replaced by something dramatically less forgiving of agency efforts to stretch the meaning of the statutes they enforce."
The crypto space was quick to celebrate the Supreme Court's decision last month, with the Crypto Council of Innovation noting that it called into question the "role and firepower" of regulators such as the SEC.
Uniswap vs the SEC
There's no love lost between Uniswap and the SEC, with the DEX itself facing an enforcement action from the regulator.
In April, Uniswap revealed that it had been the recipient of a Wells notice from the SEC, which the company's chief legal officer Marvin Ammori called an "abuse of power" on the part of the regulator.
The following month, the exchange pushed back against the SEC in a blog post, calling its legal arguments "weak" and "an effort to expand its jurisdiction beyond exchanges to communications technology."
Edited by Stacy Elliott.