A recent legal dispute surrounding token airdrops has received support from prominent crypto lobbying organizations, including the Blockchain Association and the Crypto Council for Innovation.
These Washington, DC-based lobby groups have a “amicus brief” supports clothing brand Beba in its lawsuit against the US Securities and Exchange Commission (SEC).
Details of the ongoing legal battle against the SEC
The case, filed in March, seeks proactive clarity from the SEC on how token airdrops comply with U.S. securities laws.
Beba and the DeFi Education Fund argue that airdrops fall outside the scope of the “Howey Test,” a legal standard that determines whether a transaction qualifies as an investment contract.
With this measure, the plaintiffs argue that airdrops do not require a “monetary investment” because tokens are typically distributed for free without the expectation of profit.
Attorneys for the Blockchain Association and the Crypto Council emphasized this point in their filing, arguing that the SEC’s regulation of token airdrops is a excessive extension of the agency’s powers.
1/ Today, @BlockchainAssn & @crypto_raad filed an amicus brief @fund_defi & @BebaCollection v. SEC. Does an airdrop mean investing money even if it is free? The SEC says yes; plaintiffs say no. Plaintiffs are right. We explain why.https://t.co/9uVUn23PVN pic.twitter.com/OTIsAEJwM0
— Marisa Tashman Coppel (@MTCoppel) October 28, 2024
Looking for clarity on Crypto Token Airdrops
Token airdrops have become a prominent point of contention for the digital currency industry. SEC Chairman Gary Gensler has signaled his agency’s intention to regulate nearly all digital assets under existing securities laws.
The SEC’s approach has faced significant backlash, with several crypto companies claiming that agency actions violate the Administrative Procedures Act (APA), which outlines the process for federal agencies to create and enforce rules.
According to Beba, Coinbase, Binance and other plaintiffs, the SEC’s enforcement strategy lacks “adequate regulatory support.”
In their summary proceedings, the Blockchain Association and the Crypto Council argue that the SEC’s interpretation of the Howey Test does not take into account critical differences between traditional financial instruments and digital assets.
In particular, they emphasize that airdrops do not involve direct investments, which they argue negates the applicability of securities laws in this context.
Marisa Tashman Coppel, chief legal officer at the Blockchain Association, pointed out that a lack of “common enterprise” further challenges the SEC’s approach, as recipients and issuers of airdrops often do not share a common business interest.
However, the US SEC has already moved reject the lawsuit, claiming that it has the authority to regulate crypto assets as securities.
This motion comes as the agency continues to pursue regulatory action against high-profile digital asset companies, creating a climate of regulatory uncertainty that has led Several companies have reconsidered their activities in the country.
The Blockchain Association and Crypto Council are urging the court reject the SEC’s motion to dismisscalling for regulatory clarity to prevent “stifling innovation” within the US crypto industry.
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