Two congressmen have given Gary Gensler until the end of the month to clarify how the SEC handles cryptocurrency Airdrop , asking for answers to questions about the agency’s stance on the Airdrop.
SEC under pressure from Republican lawmakers to clarify Airdrop handling
On September 17, two Republican Congressmen, Tom Emmer and Patrick McHenry, sent a letter to SEC Chairman Gary Gensler , asking for clarification on how the agency XEM and handled recent cryptocurrency Airdrop , accusing the SEC of "overdoing" actions that hinder the development of blockchain technology in the US.
The future of the peer-to-peer digital economy cannot be left to the authoritarian whims of @GaryGensler .
— Tom Emmer (@GOPMajorityWhip) September 17, 2024
Today, @PatrickMcHenry and I are requesting answers from the SEC on their position that airdrops are securities transactions. pic.twitter.com/UFm7ymdEaj
One of McHenry and Emmer’s biggest concerns is that the SEC could consider Airdrop to be securities. If Airdrop are classified as such, blockchain projects would have to comply with a complex set of securities-related regulations, including registering the offerings and complying with investor protection regulations.
The two congressmen also cited examples of Airdrop related lawsuits that the SEC has accused and called these Airdrop campaigns “unregistered securities transactions,” including the lawsuit against TRON founderJustin Sun in March 2023 and Hydrogen Technology Corporation in September 2022. The SEC argued that distributing free Token could violate securities laws, forcing many blockchain companies to block US users from participating in Airdrop.
The letter also expressed concern that the SEC’s misapplication of securities laws could hinder the development of blockchain technology in the United States. The lawmakers wrote:
“We are concerned that the SEC’s misapplication of securities laws could stifle the decentralization of blockchain networks and hinder the growth of U.S.-based cryptocurrency businesses. By prohibiting Americans from participating in Airdrop, the SEC is preventing cryptocurrency users from fully accessing the benefits of blockchain technology.”
They are scared to death of decentralization because it restores what this country was built on, which is by the people from the ground up. pic.twitter.com/0SgLMN4IBu
— Tom Emmer (@GOPMajorityWhip) September 17, 2024
McHenry and Emmer also argue that classifying Airdrop as securities could have a major impact on the usability of Token on blockchain platforms. Instead of serving consumer and ecosystem purposes, these Token could be subject to tighter scrutiny under securities trading regulations.
In addition, the two Representatives also raised five key questions to request clarification from Gary Gensler by September 30. These questions focus on how the SEC classifies Airdrop, how to differentiate them from other reward programs such as credit card points or airline miles, and whether the SEC has fully assessed the impact of treating Airdrop as securities on the market, economic growth, and tax revenue.
5 Questions 2 Congressmen Sent to Gary Gensler
Amid the growing tensions, the U.S. House Financial Services Committee will hold a series of hearings on the SEC’s handling of digital assets. One hearing will take place on September 24, where all five SEC commissioners will face questions from lawmakers. The hearing will focus on the SEC’s “politicized” approach to digital assets.
Currently, the SEC is also facing a lawsuit from the DeFi Education Fund (DEF) along with apparel company Beba LLC to protect Airdrop from securities classification , clarifying the origin of “Airdrop” in the SEC’s securities classification system.
It can be seen that the SEC is abusing the term "securities" to hold accountable many large companies in the industry, including exchanges Coinbase ,Binance , Kraken , Robinhood , Uniswap , infrastructure developer ConsenSys , Non-Fungible Token platform OpenSea , putting pressure to prevent ETF Solana , forcing eToro , Ripple and Terraform Labs to pay fines,...
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