Uniswap has been hit with a $175,000 fine by the Commodity Futures Trading Commission (CFTC). The charge? Offering leveraged and margined retail commodity transactions in digital assets without proper regulatory approval. 

This penalty also comes with a warning. Uniswap Labs, the company behind the protocol, must stop any activities that violate the Commodity Exchange Act (CEA). Ian McGinley, the CFTC’s Director of Enforcement, said: 

“Today’s action demonstrates once again the Division of Enforcement will vigorously enforce the CEA as digital asset platforms and DeFi ecosystems evolve. DeFi operators must be vigilant to ensure that transactions comply with the law.” 

Leveraged tokens offer more exposure to cryptos, which means they’re riskier. According to the CFTC, these trades were illegal because they didn’t involve “actual delivery” within 28 days. Apparently, that is a requirement for transactions like this.

Plus, Uniswap was letting regular retail traders—people who aren’t supposed to engage in these risky transactions—participate without proper oversight.

This is actually part of a bigger story about the ongoing battle between U.S. regulators over who should regulate what in the crypto market. The Securities and Exchange Commission (SEC) has traditionally been more aggressive, going after projects it considers securities.

The SEC has been going hard on crypto firms, cracking down with lawsuits and enforcement actions left and right. They’ve taken on Coinbase, accusing it of running an unregistered national securities exchange, broker, and clearing agency. That case is still in the works.

Back in 2019, the SEC also went after Telegram, saying its $1.7 billion token sale was basically an unregistered securities offering. The court backed the SEC on that one, putting a stop to Telegram’s plans with a preliminary injunction.

For instance, in the case against Ripple, the SEC argued that XRP was sold as an unregistered security. But, the court disagreed on some points, saying XRP sales on exchanges did not constitute securities offerings.

Another win for the industry was when the D.C. Circuit Court found the SEC’s rejection of Grayscale’s Bitcoin ETF application to be arbitrary and capricious. 

On the other hand, the CFTC has generally focused on derivatives but is increasingly asserting itself in the industry, especially when it comes to commodities. 

There’s also a push in Congress to clarify who does what. Some lawmakers are leaning toward giving the CFTC more authority, especially over assets that don’t neatly fit into the SEC’s definition of securities.

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