"We Plan to Win" - Hayden Adams on Uniswap vs. the SEC

The big question in our minds, in everyone's mind, is are you going to win?

The SEC is dropping a lawsuit on Uniswap. This is absolutely monumental, a massive escalation when it comes to the prosecution of crypto, and more specifically this time, DeFi. We have Hayden Adams, the founder of Uniswap, on the podcast today.

Two different reactions. One could be, I'm scared. Uh, they're coming for the most beloved, most uh enjoyed DeFi protocol with a United States founder with offices in the United States. Oh no, uh, what are we doing? Where is future uh DeFi going? An alternative reaction is they are coming for our best example. They are coming for our best people with our most with the most amount of support. Uh I, and personally, in the latter camp, uh, where I think Hayden Adams is gonna take the SEC to the absolute ringer. Uh, and because they they represent Uniswap Labs and Uniswap the protocol represents the purest form of DeFi. Uh and so at the very least, once this probably long court case wraps up, Uniswap will be claimed the victor, I hope. Uh, and we will have to actually have some strong precedent about uh some of the things that makes DeFi tick.

Well, let's go. It's fight time, and Hayden Adams seems ready to fight. He's gonna be right on. But before we get to the conversation, we want to thank the sponsors that made this episode possible, including.

Bankless Nation, the SEC versus crypto, round like 74, but this time a little bit different. This time versus Uniswap Labs. Hayden, uh, Uniswap recently got a wells notice from the SEC. Can you shed a little bit more light as to the nature of that wells notice? What is the SEC concerned about? What are they coming to talk to you guys about? Why are they delivering you guys a wells notice?

Yeah, so you know, this gets at like the heart of everything that we do. Um, you know, normally it's up to Congress to set the rules, and then it's up to the SEC to enforce those rules. Uh, but we're in this uh kind of strange regulation by enforcement era where Congress has not set clear rules, and in that absence, uh the SEC is essentially taking very aggressive stances and basically trying to shut down crypto and going after all sorts of projects. Um and you know, Uniswap labs and Uniswap, uh the protocol is the you know largest protocol in in DeFi, and I think they ultimately think that it shouldn't exist, uh, that DeFi shouldn't exist. And so, you know, they're bringing a case against one of the best actors in the space. Uh, and I think we've seen that as a pattern, right? They didn't really go after uh FTX until it was way too late, but they went after Coinbase, uh, now they're going after us. Um, you know, we think that we're on the right side of history, we think that you know, everything you know, everything that we

We are like, you know, a startup, one of our first hires was our chief legal officer, employee number like six or seven, which is unprecedented in the startup world. And uh, you know, we've been uh very careful to comply with the law since the very beginning, um,

in the absence of very clear laws. And then so, you know, this is sort of like the next step in this regulation by enforcement uh journey. Um but we think that we have a really good case, we think we're gonna win.

Were there any communications between Uniswap Labs and the SEC prior to the Wells notice? Or was the Wells notice the first instance of any sort of communication uh between uh the company and the SEC?

Yeah, so you know, they're there they've been going like I think that you probably saw like there was like a Wall Street Journal article back in 2021, I think, maybe it was. So it's there's been like years of kind of uh you know collecting information, et cetera. Um

and

but but at the same time, like, you know, they sort of investigate everyone in crypto, right? Uh you know, there's it's been reported they're investigating the Ethereum Foundation, it's been reported, you know, almost almost everyone in crypto has been investigated by the SEC. Uh so it doesn't really mean a lot. Um but

You know, I think that you know the difference here is that we've now received a Wells notice, uh, which means that they're intending to bring a case. Um by the way, when it when you know you did ask earlier, and I I wasn't trying to avoid uh when you asked you know what the case is about. Um

what the case is about

uh you know essentially is is three three big things. And you know, there's gonna be a I'm sure there'll be a lot more details, public, especially once or if if slash when they actually bring a case. Uh right, the Wells Notice is sort of just a first step to getting there. Uh but it essentially gets at three core issues. Um the first one is whether or not you know our interfaces, both the wallet and the web app, uh are a broker. And this is the thing that they just lost in court on, like two weeks ago. With Coinbase, right? With Coinbase, where you know, and and they didn't just like lose in court. It didn't like go to trial and they lost in court. It lost at the earliest possible stage that you can lose at. It was a judge threw it out.

Yeah.

So it basically wasn't

The whole thing was invalid.

even worth like discussing in court. It was so clearly not a broker. It got through the

Who's it? Sorry. Yo, don't waste our time type.

Yeah. And it was like, it's not worth discovery, it's not worth, you know, arguments. It's it's just like this thing is clearly not a broker. Um and our wallet is very similar to their the Coinbase wallet, like almost like we have like a uh you know, probably fewer features, but uh and then our interface, you know, is again very similar, at least in terms of how it comes to you know trading and interacting with tokens.

The interface meaning the Uniswap front end, like uniswap.app, the website is the interface, is what you're talking about.

Yeah, exactly. And then it's gonna get at you know whether or not so we think you know, very obvious uh win there. Um I mean we think obvious win every step of the way, but but that's sort of one of them. And then uh next kind of big bucket would be you know, uh, is uni a security? Um

And uh, you know, there's a pretty strict definition of what is a security. You have to meet you know all the prongs of the Howie test. Um and we're pretty you know, you know, we're we're very confident that it is not. So you know, there's no contract between you know labs in the community of hundreds of thousands of people. Uh, you know, the tokens were airdropped to the community for free. There's no you know, investment of money. Um, you know, I I think that you know you can go through all of it, but the point here is uh it's it's not surprising that they're bringing this case, despite how obvious it is to us that it's not, uh, because they also think ETH is a security and they're going after ETH, or we think, you know. Um at least that was sort of there was some news around that in the in the past few weeks, I'm pretty sure you guys covered. Um and so you know, if they think they they they basically want to dramatically expand the definition of what is a security to encompass all digital assets. And uh, or that's at least my impression. And you know, a very kind of salient example here.

Is that when you uh I don't know if you saw that, there was a you I'm sure you did, but there was a court hearing where um

uh a congressman asked, you know, are Pokemon card securities? Oh yeah.

Richard

Yeah and the answer was no. But then it was like, well if you put a Pokemon card on a blockchain, is it a security? And then it's like, well maybe I don't know.

Facts and Circumstances

But it's like it's just a file format. It's like, you know, if it's like it's so obvious that the difference between whether or not something's a security is not whether or not it lives on a blockchain. Um, you know, the vast majority of tokens are very clearly not securities. Um, you know, commodities, uh, you know, ETH, bitcoins, you know, stable coins, meme coins, right? Like whatever it is, there's there's just it's very clear. Um, so we also think very, very good case there. Um

final one gets at uh really the heart of DeFi and and open source code. You know, it's basically is the Uniswap protocol a unregistered securities exchange? Um

Wait, wait, wait, wait. That is you'll basically you you guys don't have any access keys to?

I I think it's it's it's not there there there's no I mean I think it's it's more like, you know, is Uniswap Labs operating in an unregistered securities exchange because this protocol exists? Are we somehow like managed to be able to do it? Because they publish code.

Yeah. They help to get at the heart of like, you know, publishing, is publishing code operating an exchange? We don't think so. Um so it's really gonna go, you know, and this is where I when I talk about like this probably ends in the Supreme Court or whatever, is it get it gets at these like very fundamental uh things. Um and we think that when you deploy open source code to a decentralized blockchain that is not operating or managing an exchange. Uh it's very obvious to me. I'm not a lawyer, but I have a rudimentary understanding of the technology, uh, which is something that maybe they don't. Um I I I will add onto this one that I think that they know this as well, probably, because there was this exchange rulemaking. Um not sure if you guys saw that, but basically, like

earlier this year, or I guess last year, they tried to redefine what an exchange was to be like dramatically.

broader uh to the point where like it captures all sorts of things like all sorts of like various systems for transmitting information and what like just like very broad redefin definition that you know is gonna have to go through and would you know I I assume if they have if they eventually tried to like go through with that would also be challenged in court.

But you know the fact that they kind of had to try to rede like they sort of in parallel to trying to bring a case and claim it already is one, they're also trying to redefine what an exchange means because I think they ultimately know that it's not but they're bringing the case anyway. So and that's again just my impression.

Do you want this to go to the Supreme Court? Just because like, hey, let's just settle this?

I would, I mean, it depends on what you mean by one. What I want is I think that the technology that we build is good for the world. We think it's empowering. We think it you know creates fairer, uh, you know, more transparent systems, more secure systems. Uh, and we want our and we think that our technology should be used and widely adopted. Um and if that means we have to take this to the Supreme Court, we will. Um, we would rather not have to, and that you know, we'd rather you know more clear laws be put in place that that make you know make it clear that that this technology is legal. And uh again, we we you know think the laws are already clear there, but we would rather like more ex you know that that to be made more explicit versus having to you know take it to the Supreme Court. But uh you know, if if I have to wear Unisocks to the Supreme Court in three years as the culmination of all this, uh that's that's where we're gonna end up.

I mean three years. What a whole bunch of wasted time though. Uh I would say.

And it's gonna be like tens of millions of dollars. It's it's gonna be crazy and it's gonna be a you know, thousands of hours of time. Um so it it is really, you know, disappointing and frustrating. Um

I will say that, you know, the community's sort of support and reaction on Twitter and more broadly was really motivating because it is like a really long battle. And today is like, and like, you know, we're kind of, you know, we're we're sort of like motivated. We like we stand by what we do and we're excited to defend ourselves. Um and I think to some degree, like this sort of like potential looming threat versus just like uh we know what we're up against and being able to talk about it and face it head on is is really nice and and sort of like a good moment for us. But at the same time, it's like also really you know frustrating. And if we were a smaller, like a lot of for a lot of startups, this would just like completely shut them down and they wouldn't be able to operate. And so there's sort of this like chilling effect on other people. But so that's part of why we want to really be vocal and in public and defend ourselves.

Oh, can you talk about this? Because it wasn't long ago when you were that kind of the the bright bright-eyed uh like uh start startup founder in in DeFi. It really wasn't that long ago. And I remember having discussions with you in the in the early days of of that. And like I'm wondering how you th what you think this does to uh US based entrepreneurs, crypto entrepreneurs, DeFi entrepreneurs, people who were exactly in your shoes you know five or six years ago.

Yeah, so look, I, you know, I love living in New York. I live, you know, it's it's my home, and I I, you know, uh love, you know, the country that we live in. And at the same time, like I would never recommend at this point anyone who's starting a crypto project to you know base their operations here. Um I I will say that like there's there's sort of a broader thing, which is, you know, even if like it's not just like are you based there, it's like do you have any US users? Like there is sort of this broader nexus, um, right? They they can still go, you know, if you have US users, they still can kind of claim and go after you. And so I'd say that like there's definitely it seems like there's this uh desire by the SEC to just like shut it down and be like, we don't want this thing to exist. Whereas like it's very obvious to me that you know this technology is here to stay, right? It's the you know, it's like it's like kind of almost imagine that, you know, in the earliest days of the internet, and you don't even have to imagine it's actually what happened. In like the very earliest days of the internet, there were efforts to be like, oh, like people can just like you know, like buy and sell things on the internet, like that's horrible. Like we should like that should be illegal, right? So there were efforts to like stop e-commerce. And uh, you know, imagine what would have happened. And and then and then what ultimately happened is almost like a safe harbor-esque thing was put in place because uh this was under like Bill Clinton era, which was basically like, well, for this technology, like this technology is clearly so powerful, we don't want it to all go abroad, we want it to be built in the US. And what did that allow? It allowed like all the tech companies to be built in the United States. And so you have like the Googles and the Apples and the Microsoft's, um, in part because like the internet was recognized as an important enough technology to give it some space to grow, while the you know, the things that came around it were really complex. Uh, what we're seeing, unfortunately, with crypto, uh, which is very obviously like the next evolution, where the internet you know democratized information and and access, you know, made made information more programmable and and and accessible. And what we're doing with with blockchains is make value and ownership uh more kind of universal and and um standardized and accessible.

But what we're seeing this time around is uh essentially some rogue essentially a few like rogue government agencies, or like a rogue government agency and a few kind of like even like not I don't even know if it's the majority, but like politicians essentially for political reasons, like trying to shut it down and not recognizing like its importance to the future of this country. Um and so it's really not good for the country. I think that like ultimately, um uh, you know, like the internet, it's inevitable, and it's just being made more painful. And what you'll end up happening is a lot of the innovation will start happening abroad, and then like the taxes are going to other countries and whatever, like you know, all that. Um and so it's it's not good for America, in my opinion. Um, but it is uh

I completely agree. So so I I I'm just curious your take on why why they're doing it then. Like, is it we just have different leadership at the helm, right? So, like my my my parallel is you look at the 90s internet, it was birthed uh in the US, and mostly all we needed from uh legislators and lawmakers is just to kind of get out of the way of the entrepreneurs uh in the US. I mean it's helpful to get some regulation, but can you imagine if the the FTC, for example, regulates you know the uh communications uh in the U in the US if they went to Google and brought them to court in like 19 circa 1999? Imagine how bad that would be for American internet entrepreneurs. And it seems to be the approach that uh the US is taking to the internet of value. I'm just curious, like, why? Is it because the US uh has too much vested interest in their inherent in their financial uh system that they didn't have for a communications protocol? Like, why is this happening uh in crypto?

Yeah, I think that like sometimes in crypto we we tend to like try to reduce everything down like well it's like all this like one massive coordinated thing. Whereas I think that what is really happening is you have a combination of factors. So you have like, I'd say like a kind of a slightly like a kind of like a rogue government agency with political uh, you know, that is sort of more dictated, their strategy is more dictated by like creating headlines, uh, you know, bringing cases against Kim Kardashian or whatever, um, uh versus going after, you know, real bad actors that are that are harming people. Uh or not saying I don't, again, not kind of waiting into that keep that specific thing, but I'm just saying that like there's sort of like a political motivation uh from what I can tell uh for for you know the SEC. And then I'd say uh within uh you know uh

Within Congress and whatever. There's like varied levels of support and interest. I think a lot of it is like, to some degree, it's almost like some of it is almost like disinterest or di deference, or just like, okay, we'll let them deal with it. And like, then some of it is, you know, probably more, you know, politically motivated, and then some of it is probably like uh, you know, misunderstanding or or ignorance around the technology. Um, there is certainly some support. Um

I think some of it is like uh there's sort of like uh I think the one thing that I hope for our industry in in this moment is that we can uh do a little bit of a better job telling our story. I think what we've seen historically is that a lot of other people have sort of been able to portray crypto in a certain type of way. Probably like the one of the biggest moments in like.

uh shifting of crypto narrative was actually like uh

you know almost like was like actually when like uh meta I at that time Facebook w you know announced uh Libra and was gonna do their stablecoin to compete with the US dollar. And I think that was like a moment where suddenly like

for an entire contingent of uh the political spectrum, it almost like associated like

Crypto with like big tech, uh, whereas what we actually are is a little is more of a like a grassroots kind of bottoms-up movement, which is often more in line with and so I think that there's like these like a lot of it, a lot of you know politics is just like knee-jerk tribalism and and reactions, and oh, like my side thinks this one thing about this one thing, so I think this thing too. Like there what we really need to do is better tell our story about how we help people. And I think that like one really uh interesting thing that came out of um that I've seen in the past two days, and I tweeted about this yesterday. Um

Was that uh

shockingly, uh to some degree, but not totally shocking, like the the media reporting around this case, the mainstream media reporting, was actually some of the best that there's ever we've ever had. Like in pre like a few years ago, it would have been like, yo, like uh, you know,

uh crypto project, yo, which is, you know, primarily used for illegal money laundering and whatever, like, yo, uh now sued for obviously like versus like this time around, like you have, you know.

Uh the the fortune piece was really good. You also have like things like the Wall Street Journal explaining that this is an automated system that runs on a blockchain, whereas like early, like you have like a much higher quality. Some of the like reporting around it has actually given us a more fair representation. It's not perfect, but it's like I think people are starting to like more and more people are starting to recognize that that you know

there is like a more important story here, that there's a more important technology here. Um and so I I think in the past sometimes there's this like very adversarial stance crypto takes against the world, which can make sense in certain contexts, but I think at the same time, like part of it is we actually have to like.

still build bridges and like explain like

when you build something that is like good for the world, like we if we we we we believe what we're doing is good, we believe it's empowering. And so when you do that, it's like part of it is just about how can we explain things to people.