The Commodity Futures Trading Commission (CFTC) settled charges this week against a digital assets firm for trading violations.
The charges were filed against Universal Navigation Inc., doing business as Uniswap Labs, which illegally offered leveraged or margined retail commodity transactions in digital assets via a decentralized digital asset trading protocol. The order requires Uniswap Labs to pay a $175,000 civil monetary penalty and to cease and desist from violating the Commodity Exchange Act (CEA).
“Today’s action demonstrates once again the Division of Enforcement will vigorously enforce the CEA as digital asset platforms and DeFi ecosystems evolve” CFTC Director of Enforcement Ian McGinley said. “DeFi operators must be vigilant to ensure that transactions comply with the law.”
Uniswap Labs contributed to the development of a blockchain-based digital asset protocol that offered to institutional users in the United States and abroad the ability to trade digital assets through use of the Ethereum blockchain. The protocol allows users to create and trade with liquidity pools, which consist of a matched pair of digital assets that are valued against each other.
To facilitate access to the protocol, Uniswap Labs developed a web interface that it made available to users, where they could trade in hundreds of liquidity pools on the protocol. Among the digital assets traded through the interface were a limited number of leveraged tokens, which provided users leveraged exposure to digital assets such as Ether and Bitcoin.
The CFTC’s order found that these leveraged tokens can only be offered to non-Eligible Contract Participants on a board of trade that has been registered by the CFTC as a contract market. Uniswap Labs is not registered as such.
Uniswap Labs offered substantial cooperation with the Division of Enforcement’s investigation, thus they faced a reduced civil monetary penalty.