CFTC Penalizes Uniswap Labs for Offering Unregistered Digital Asset Derivatives

The Commodity Futures Trading Commission (CFTC) announced an enforcement action and settlement against Universal Navigation Inc., doing business as Uniswap Labs, a Delaware corporation based in New York. The regulatory order finds that Uniswap Labs illegally offered leveraged or margined retail commodity transactions in digital assets through its decentralized trading protocol interface. According to the CFTC, Uniswap Labs contributed to the development and deployment of a blockchain-based protocol on the Ethereum network that allowed institutional and retail users in the United States and abroad to trade digital assets using liquidity pools. To facilitate protocol access, Uniswap Labs created and maintained a web interface through which users traded hundreds of liquidity pools. Among the assets accessible through the interface were leveraged tokens providing exposure to cryptocurrencies such as Bitcoin and Ether. The CFTC determined that these leveraged tokens constituted retail commodity transactions that did not result in actual delivery within 28 days. Under the Commodity Exchange Act (CEA), such transactions may only be offered to non-Eligible Contract Participants on a designated or registered contract market, which Uniswap Labs was not. As part of the settlement, Uniswap Labs agreed to pay a $175,000 civil monetary penalty and to cease and desist from further violations of the CEA. The regulator noted that the penalty amount reflects substantial cooperation by Uniswap Labs during the Division of Enforcement's investigation. The CFTC advises traders and investors to verify any entity's registration status before transferring funds or engaging in derivatives trading. Users can verify registration information using the National Futures Association BASIC database. Suspicious activities and violations of commodity trading laws can be reported directly to the CFTC Division of Enforcement or Whistleblower Office.