The Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges against Universal Navigation Inc. d/b/a Uniswap Labs, a Delaware company based in New York.
The order finds Uniswap Labs 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), as charged.
Uniswap Labs contributed to the development, and deployed versions, of a blockchain-based digital asset protocol that offered to non-Eligible Contract Participants and 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.
In order to facilitate access to the protocol, Uniswap Labs developed and maintained a web interface that it made available to users. Through the interface, users could trade in hundreds of liquidity pools on the protocol.
Among the digital assets traded on the protocol and through the interface were a limited number of leveraged tokens, which provided users leveraged exposure to digital assets such as Ether and Bitcoin.
The order finds these leveraged tokens are leveraged or margined commodity transactions that did not result in actual delivery within 28 days and therefore can be offered to non-Eligible Contract Participants only on a board of trade that has been designated or registered by the CFTC as a contract market, which Uniswap Labs was not.
The CFTC recognized Uniswap Labs’ substantial cooperation with the Division of Enforcement’s investigation of this matter in the form of a reduced civil monetary penalty.
