On May 21, Uniswap Labs, the company behind the leading decentralized exchange platform Uniswap, filed a 43-page document detailing reasons why the SEC should not pursue legal action against the platform. Recall that a few weeks ago, the SEC issued a Wells notice to Uniswap, alleging violations of US securities law. This lawsuit has caused concern in the DeFi space, with many observers questioning the potential impact on the price of UNI if the issue goes to court.
Marvin Ammori, chief legal officer of Uniswap, stated that the SEC's entire case rested on the incorrect assumption that all tokens were securities. To capture what the decentralized platform does, the SEC should change the definitions of broker, exchange, and investment contracts.
How Similar Cases Affected XRP and LBC
A Wells notice is typically the final step before formally issuing charges. Following the news on May 21, the native token of Uniswap, UNI, experienced significant gains, following the current cryptocurrency market trends. The 22nd largest cryptocurrency by market cap surged from $7.79 to $9.38 and is currently trading around that level. However, it's important to consider what might happen to UNI's price if the case goes to court. To anticipate a likely outcome, it's essential to examine the performances of Ripple (XRP) and LBRY Credits (LBC) when they face similar actions.
The American Securities and Exchange Commission (SEC) filed a lawsuit against Ripple in December 2020, accusing the platform of selling XRP as an unregistered security and raising more than $1.3 billion illegally. The XRP price dropped significantly to around $0.20 thereafter. It leveled off until April 2021 when it rose to almost $2.37 in a bull run built around BTC's movements.
At the time, it appeared that the SEC's case was falling apart, and Ripple's position was getting stronger. This contributed to the bull run. Then, it emerged that wasn't the case, so XRP dropped again. It's currently trading for $0.53, down by over 80% from its all-time high recorded on January 4, 2018, despite some experts and observers hinting at a potential settlement or Ripple eventually winning the case.
The SEC also targeted LBRY Credits, another blockchain platform specializing in digital content, for allegedly selling securities from July 2016 to February 2021 without filing a registration statement. This allegedly deprived potential investors of crucial information.
In November 2022, a court ruled in favor of the SEC, finding LBRY Credits guilty of violating the Securities Act by selling LBC, which was trading for $0.01 at the time. In 2023, a district court judge in the District of New Hampshire ordered LBRY Credits to pay a fine of $111,614, leading the company to announce its winding down on October 19, 2023. Since then, the project has been inactive on its social media channels while the token's value declined further
What's next for the Uniswap (UNI) token price?
The Wells notice has not had any negative effect on the price of the UNI token. In fact, its value has increased by 35.83% in the past week, with the bulk of that gain occurring on May 21 after the Uniswap Labs team released their Wells Notice response with an article titled "The fight for DeFi continues." If the SEC files official charges, a price correction can be expected, but a steep decline is not likely to happen in the long run.
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