SEC vs Uniswap Labs - Is losing good?

Token and Security: A Perspective on Uniswap Labs vs. the SEC

The following presents an alternative perspective to the confident expectation of winning the case. I am here to paint a picture of a world where Uniswap Labs loses the case against the SEC.

Token and Security:

The world would be better off if the SEC prevails. We’ve already witnessed a reality where it emerges victorious. In this scenario, Venture Capital privately raises funds at low valuations akin to accredited investors in the equity realm. All the value is siphoned away, and airdrops serve as golden parachutes for founders and VCs. These parachutes unfold over years through slow selling. There’s no incentive to generate value for the token in which people have come to believe. While a glimmer of hope exists for fee switches, token burns, and token memberships, implementing these could land those with the golden parachute in trouble for making the token resemble too much of a “security.”

The Revolving Door of Nepotism:

Insiders further extract value. Individuals closest to the information make moves to benefit themselves. A significant LP in the UNI pool withdrew funds and transferred them to Binance before the announcement of the fee switch transition. Upon reflection, it served as an excellent exit liquidity move. Who informed this person?

Former labs members or friends of labs members seek significant sums of UNI tokens for equity in competing products or get aquired with little value add to other similar products, or look for users to donate to pay lawyers to case fires. Is this truly a user-first world? Or is it still reminiscent of traditional markets where those privy to information extract value from the public?

Uniswap Losses, Good:

The SEC should compel VCs and founders to burn the UNI acquired in private rounds—pre-airdrop. The airdropped and treasury tokens are the only legitimate ones. Those who have exploited their positions of power should only claim rights to these tokens at their fair user value. What have VCs done to enhance the protocol? Nothing. If they did, it would likely be deemed a security. They exist to create artificial value and subsequently destroy it. To rectify the system, the VC model must be dismantled to foster real value, and the SEC prevailing would aid in this endeavor. They would mandate the shutdown of the Uniswap Labs frontend, which raises fees without informing users. Its value lies in trust, yet that trust has been monetized to the detriment of users.

FOSS Frontend Focus:

With VC and founder tokens burned and the privately owned frontend shuttered, we can rebuild. Utilize voting and the treasury to finance genuinely open-source frontends. These frontends could specialize in various routes, communities, and user personalization. Direct use cases and fees toward liquidity, loyalty programs, and rewards. Rectify the liquidity layer of the internet.

If the SEC wins, may the users triumph. It would usher in a world distinct from today’s—one where UNI can stand alongside BTC as decentralized infrastructure.


Thank you for this well thought out opposing perspective. I think this post certainly brings to light issues with the current state of Uniswap Labs that deserve further discussion.

Essentially, this begs the question of whether Uniswap Labs, which has corporate interests, can be effectively separated from influencing governance of the Uniswap protocol.

Insider trading is not a novel concept in crypto, or finance in general, and while it is likely the case that these practices will be difficult to curtail, there are steps the community can take for increased transparency and measures discouraging such behavior. This could be more effective than additional legislation and government regulation, but I do agree that the SEC can set a proper precedent.

The scenario you describe of the SEC compelling VCs to burn tokens acquired in private rounds could be beneficial for current Uniswap users - as this will shutter corporate interests from interfering with the protocol. However, this does not seem like a “one size fits all” solution. Projects need venture capital in order to get off the ground and venture money needs a trade off of some equity or compensation. In order for a DAO to be successful, it first needs the funds to build a project, achieve product market fit, and grow a user base.

I do not think that removing early stage investor capital and founder tokens from the equation will be the key to a more user governed future. Instead, I think your point about separating corporate entities from DAOs and what regulations can achieve this will drive more progress.

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Isn’t SEC the biggest insider trader and market manipulator itself? Aren’t people in Congress openly and shamelessly insider trading always? What are we talking about here, these regulators are not here to protect from insider trading, they are here to monopolize it. The whole purpose of crypto is to empower people against such players, not to rely on them.

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The whole purpose of crypto is to empower people against such players, not to rely on them.

Can we unpack this a little … firstly (and you’re welcome to offer evidence against), crypto is not homogenous … you have everything from crypto-anarchists who believe that BTC is the one and only, up to people grappling with financial inclusion in developing countries where the govt is basically the reserve bank/landlord with guns.

What crypto does is enable shifts in the monetary architecture, some (most?) of which will not please TradFi despite the public good from lowering costs (which translate into profits on the otherside). Example is T+0 settlement where the FCA (UK watchdog) pointed out that L1/L2 rollups are effectively the settlement logic which strips out a whole bunch of custodial service providers.

Regulators exist because they have institutionalised certain forms of trust … SEC is tasked with orderly markets. Now whether they do a good/bad job is an open question but it exists for a reason. The only way to supplant it is to provide what it does (economic fairness such as information symmetry) at far lower cost. If you watch Gavin Wood, he postulates [google Gavin Wood TEDxVienna] the shift from social/institutional trust on faith to more reliance of data “truth”. The SEC may be a legacy relic of top-down fiduciary obligations but it is unfortunately the official relic with legal powers which means you cannot just ignore it. Fight & flight are the 2 extreme choices, neither of which is palatable.

So what are the tactical considerations for any DeFi protocol to bootstrap?

  • grants … rely on existing DeFi funding mechanism to try and get past the MVP to something that generates value
  • debt/savings … well nobody TradFi is lending so this means you’re left with rich Korp*Rat dropouts or trust-fund babies (cough FTX cough) which is rather small meme-pool to draw ideas from
  • equity which means selling your soul to VCs (or at least renting it)

The exit to community is proving harder than it sounds, because
a) community needs to get versed in civics and get some long-term cohesion instead of a flashmob of monetary-incentivised traders or a cabel of protocol-politicians intent on whaling their way into insiderInfo.
b) trying to get consensus on standards or tactical choices is a slow drawn-out process … there is a lot of energy wasted to get past voter apathy
c) its new so there’s hidden landmines … MakerDAO been anguishing over being not centralised enough to fire someone but not decentralised enough to escape liability …

So regulators provide a point of reference (even if negative), if only to identify the statutory equivalent and try to engineer a better/faster/cheaper way to achieve the same result tokenomic-wise without the red tape. So win-lose-draw … we all learn from it and either workaround the bottleneck or run away

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