Reps Ask US SEC for Clarification over Airdrops Regulation
The two Republican lawmakers have given the U.S. Security Exchange Commission until the 30th of September to respond.
Two Republican lawmakers have written a letter to the U.S. SEC seeking to get an answer over Airdrops classification.
Tom Emmer and Patrick McHenry, the two Reps who wrote the letter, expressed concerns over the SEC’s decision to label airdrops as “unregistered securities,” forcing blockchain projects to exclude U.S. citizens from participating in airdrops, citing the risk of SEC enforcement action.
The Letter’s Content to US SEC
In the joint letter addressed to Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), they sought answers to five key questions: How does the SEC differentiate between rewards such as airline miles and crypto tokens that are airdropped? How is the Howey test relevant to the free crypto tokens that projects give to users?
Moreover, How does the SEC categorize tokens that operate in a decentralized manner and are driven by demand? What is the assessment of the SEC’s legal action regarding crypto securities? What has been the impact of the SEC’s allegations of securities violations on crypto projects and the potential losses resulting from such actions on crypto airdrops?
They expressed concerns over how classifying digital assets as securities might impact the market, economic growth, and tax revenue, arguing that SEC’s regulatory approach may hinder blockchain decentralization and innovation.
“By creating a hostile regulatory environment, including making assertions about airdrops in various cases and increasing warnings for additional enforcement actions, the SEC is putting its thumb on the scale and precluding American citizens from shaping the next iteration of the internet.” the letter further reads.
They also argue that the SEC’s broad interpretation of the term “security” has led to an overreach of the commission’s authority and that it “seems to make the goal of decentralization impossible to obtain“.
Additionally, the two reps gave the SEC until September 30, 2024, to respond to the letter.
SEC’s Regulatory Stance on Crypto as Securities
The U.S. SEC has taken an increasingly strong stance against several cryptocurrency assets. This has led to back and forth between SEC and crypto trading platforms over the definition of the term “Securities”.
The SEC maintains that many cryptocurrencies are securities and therefore are subject to stringent registration requirements. These platforms insist that crypto assets are fundamentally distinct from traditional financial products such as stocks and bonds, which are explicitly classified as securities under U.S. law.
