Washington, D.C. (Oct. 28, 2024) – Today, Blockchain Association and the Crypto Council for Innovation filed a joint amicus brief in support of Beba and the DeFi Education Fund in their case challenging the Security and Exchange Commission’s (SEC) interpretation of what constitutes a security in the context of token airdrops. The brief argues against the SEC’s position that freely distributed tokens through airdrops qualify as securities under the Howey test.
“The SEC’s attempt to regulate airdrops as securities by ignoring the fundamental ‘investment of money’ requirement of the Howey test threatens innovation and creates unnecessary regulatory uncertainty,” said Marisa Coppel, Head of Legal at Blockchain Association. “This overreach has real consequences, driving companies and talent away from the United States to jurisdictions with clearer regulatory frameworks.”
“The SEC’s flawed view that an airdropped token can somehow constitute an investment contract and is therefore a security is contrary to Supreme Court precedent and common sense. In addition, by pursuing its aggressive strategy of regulation by enforcement, the SEC’s approach has created significant regulatory uncertainty, stifling American innovation,” said Ji Kim, Chief Legal & Policy Officer at the Crypto Council for Innovation.
The joint amicus brief highlights how the SEC’s current approach of “regulation by enforcement” has created a challenging and punitive environment for the digital asset industry. By maintaining positions on airdrops and other crypto innovations that are inconsistent with legal precedent, the SEC is hampering the growth of an industry that could position the U.S. as a leader in financial technology.
The brief supports the plaintiffs’ opposition to the SEC’s motion to dismiss, emphasizing that the agency’s interpretation contradicts established Supreme Court precedent. As the filing notes, the absence of monetary investment in airdrops fundamentally conflicts with the first prong of the Howey test, making it impossible for such distributions to qualify as investment contracts under existing law.
