The Washington DC-based pro-crypto organizations, Blockchain Association and Crypto Council for Innovation, presented a document this Monday in support of the lawsuit against the United States Securities and Exchange Commission (SEC). The objective is to clarify the regulation on token Airdrops.
In the 30-page document, the organizations argue that a judge in the District Court of Waco, Texas, should require the SEC to respond to “Beba,” an American clothing brand sanctioned after issuing tokens to reward its customers. Additionally, they advocate responding to the claims of the DeFi Education Fund, which maintains that Airdrops do not violate securities laws.
In March, Beba and DeFi Education Fund sued the SEC, arguing that Airdrops cannot violate the “Howey Test” as there is no “reasonable expectation of profit.” This test, in place for almost a century, determines whether an asset qualifies as a security.
«The first step of the Howey Test requires that there be an investment of money for an asset to be considered an investment contract. In an Airdrop, there is no money investment, since the recipient obtains the token for free,” the lawyers explained.
Advocacy organizations have also asked the court to reject the SEC’s motion to dismiss Beba’s lawsuit and support the plaintiffs’ request for regulatory review.
They accuse the SEC of excessive regulation in the crypto space
Beba’s action is part of a series of demands from the crypto sector seeking clearer and less punitive regulation. The SEC, under Chairman Gary Gensler, has stated that almost all cryptocurrencies are securities and that related companies must register with the agency.
However, several experts maintain that the SEC exceeds its powers by applying excessive regulation in the crypto space. Beba and the DeFi Education Fund, as well as Cryptocurrency exchanges Coinbase and Binance, argue that the agency is violating the Administrative Procedures Act, a federal law that regulates how government agencies must act.
Both the Blockchain Association and the Crypto Council for Innovation accuse the SEC of failing to fulfill its responsibilities to Congress by regulating cryptocurrencies without legislative clarity. They also point out that the SEC’s actions are creating confusion and causing a talent drain in the sector.
Other players in the crypto space consider Airdrops to be just “the tip of the iceberg” of the SEC’s chilling effect on the industry. According to the document, Airdrops are being “completely misinterpreted” by the Howey Test. “Not only is there no exchange of funds, but there is also no common enterprise between the sender and the recipients,” the document concludes.
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