What Are the Legal Risks for the Developers or Liquidity Providers of a Non-Compliant DEX?
The legal risks for the developers or liquidity providers of a non-compliant Decentralized Exchange (DEX) are significant and evolving. Regulators may argue that the core developers, who initially wrote the code and control the protocol's upgrade keys, function as an unregistered exchange or a "common enterprise" under the Howey Test.
Liquidity Providers (LPs) may also face risk if their activity is deemed to constitute participation in an illegal gambling operation or an unregistered securities offering. Recent court cases have shown a willingness to target DAOs and their members, blurring the lines of liability.
Glossar
Liquidity Providers
Capital ⎊ These entities supply the necessary assets to decentralized exchanges or automated market makers to facilitate continuous trading in crypto derivatives and options.
Legal Risks
Regulation ⎊ Legal risks in cryptocurrency and derivatives markets stem primarily from regulatory uncertainty.
Developers
Architecture ⎊ Developers within cryptocurrency, options trading, and financial derivatives contexts primarily construct and maintain the underlying systems facilitating these markets.