Crypto traders are scrambling as news that Uniswap Labs is under investigation by the U.S. Securities and Exchange Commission roiled the DeFi industry Friday.
Uniswap, a powerhouse in the DeFi space with a token sporting a $29B market cap, suffered a sell-off in morning trading, with UNI dropping 2.5%, to $29.08, according to CoinGecko. The skid followed a report published by The Wall Street Journal that regulators are probing Uniswap’s investor and marketing practices.
The market action comes as other DeFi players post another banner week, with Solana, Polkadot and Avalanche each notching double-digit gains. UNI is still up 12% over the last seven days and 36% in the last 30 days.
Uniswap is a decentralized exchange founded by Hayden Adams in 2018. It’s currently the 6th largest decentralized finance (DeFi) protocol on Ethereum, according to DeFi Pulse.
The SEC, which has a policy of not commenting on or confirming pending investigations, declined to comment to the Journal. A Uniswap spokesperson told The Defiant: “We are committed to complying with the laws and regulations governing our industry and to providing information to regulators that will assist them with any inquiry.”
The reported probe is the latest sign that under new chair Gary Gensler the SEC is cracking down on the crypto industry in general. On Sept. 1, the commission announced it had filed an action against BitConnect, a crypto lending platform, alleging it defrauded investors with an unregistered $2B offering. Gensler has been outspoken about the need to rein in the largely unregulated cryptocurrency markets. In a speech in August, he emphasized that digital tokens are subject to U.S. securities laws.
Gadfly Chris Blec said on Twitter, “This situation will only help $UNI value. Once regulatory certainty is achieved and our liberty is properly limited, then institutional adoption can follow.”
Other influential voices in the DeFi community greeted the Uniswap news with defiance.
“The U.S. should be giving Hayden a medal. Instead he’s getting an investigation. We live in a financial prison,” Bankless’s Ryan Sean Adams said on Twitter.
Even Joseph Delong, CTO at SushiSwap, a project that was founded as a fork of Uniswap and has always been somewhat critical of its ties to Silicon Valley, came out in support. “keep fighting @Uniswap. Damn the man,” he tweeted.