Crypto Groups Challenge SEC Stance on Airdrops

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Crypto lobby groups Blockchain Association and Crypto Council for Innovation have thrown their weights behind clothing brand Beba in its airdrops lawsuit against the U.S. Securities and Exchange Commission’s (SEC).

Beba is currently in court in hopes of getting clarity on the approach of the SEC towards regulating token airdrops, a popular way of distributing digital assets.

However, going by recent developments, the Blockchain Association and the Crypto Council for Innovation may have now joined the case.

The two groups recently submitted an “amicus brief” supporting Beba against the SEC.

Group Faults SEC Stance on Airdrops Citing the “Howey Test”

In March, Beba, alongside the DeFi Education Fund, argued that token airdrops should not be classified as securities. At the time, their argument bordered on the “Howey Test,” a standard used to determine if a transaction qualifies as an investment contract under U.S. law or not.

Moreover, according to the Howey Test, a security must involve an “investment of money” with an expectation of profit. According to the plaintiffs, this simple implication of that is that airdrops should not qualify as securities since they are often distributed for free with no profit guarantee.

The Blockchain Association and Crypto Council have also followed in this line of argument. They claim that the SEC’s efforts to regulate airdrops as securities are simply overreaching. Moreover, if such efforts are not quickly contained, the crypto industry runs the risk of seeing innovation totally discouraged.

Calls for Clear Guidelines amid Growing Tension

Token airdrops have become a topical issue when it comes to crypto regulation. SEC Chairman Gary Gensler remains keen on regulating digital assets after insisting that a large percentage of them should fall under existing securities laws. However, the crypto industry, including large platforms like Coinbase and Binance, argues that the SEC’s current enforcement-based approach lacks legal backing.

While the SEC maintains that the court should throw out Beba’s case, the Blockchain Association and Crypto Council have now urged the court to deny the regulator’s request. They argue that the SEC appears to have not realized that digital assets are uniquely different from traditional financial products.

So, now it remains to be seen how the court would proceed on the matter at hand. Still, it is fairly certain that the court’s decision in this case could hold great importance. That is, as it will undoubtedly set the precedent for the future of crypto regulation in the United States.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence before making any trading or investment decisions.