Two Republican lawmakers are urging the United States Securities and Exchange Commission (SEC) Chair Gary Gensler to address questions regarding categorizing crypto airdrops by the end of the month.
A crypto airdrop is a popular method blockchain projects use to distribute tokens to users, usually for free. Airdrops are often associated with the launch of a new cryptocurrency or a DeFi protocol, primarily as a way of gaining attention and new followers, resulting in a larger user base.
In a letter to Gensler on September 17, Representative Tom Emmer and House Financial Services Committee Chair Patrick McHenry expressed concern over the SEC’s claims regarding airdrops in multiple legal cases brought over the past two years.
The lawmakers contend that the lack of clear regulations surrounding airdrops could weaken the country’s competitive edge in the fast-growing digital economy.
“The SEC is putting its thumb on the scale and precluding American citizens from shaping the next iteration of the internet,” they wrote.
Gensler to Respond Questions About Crypto
Emmer and McHenry also called on Gensler to answer five specific questions about crypto airdrops, including how tokens distributed at no cost are classified under the Howey test and how the SEC differentiates airdrops from other incentives such as credit card rewards.
They further inquired about the potential effects on onchain applications, economic growth, and tax revenue if airdropped tokens were classified as securities and whether the regulator had evaluated the market implications of treating crypto assets as securities.
“By prohibiting Americans from participating in airdrops, the SEC is preventing American crypto users from fully realizing the benefits of blockchain technology,” the lawmakers added.
This is the second time this month that GOP lawmakers have criticized Gensler’s leadership of the agency.
On September 10, several GOP probed Gensler, a Democrat, regarding whether his political affiliation has affected the SEC’s hiring practices.
In a letter to Gensler, the legislators, including McHenry, accused the agency of appointing people from progressive organizations to senior positions at the SEC.
The SEC is Going After Entities
Over the years, the SEC has taken legal actions against several entities over the selling of unregistered securities and other illegal financial misconducts. For instance, In September 2022, the SEC filed a lawsuit against Hydrogen Technology Corporation and its former CEO, accusing them of manipulating the market.
The company minted more than 11 billion Hydro tokens for fundraising and distributed them through airdrops, which the SEC labelled as unregistered offers and sales of their securities.
In March 2023, the SEC took legal action against Justin Sun and several companies, alleging that they were involved in the offering and selling of BitTorrent (BTT) as securities.
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