18/09/24

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Two Republican lawmakers have issued a request for United States Securities and Exchange Commission (SEC) Chair Gary Gensler to address concerns about how the commission categorizes crypto airdrops. In a letter dated September 17, Representatives Tom Emmer and Patrick McHenry expressed their worries regarding the SEC’s past assertions related to airdrops in various lawsuits over the previous two years, claiming that these actions could hinder American participation in the evolution of the internet.

The SEC’s stance on airdrops became particularly evident with its September 2022 lawsuit against Hydrogen Technology Corporation and its former CEO for alleged market manipulation involving what the agency identified as “crypto asset securities.” The SEC accused the firm of conducting unregistered offers and sales through the distribution of over 11 billion Hydro tokens via airdrops as part of its fundraising efforts. This set off alarms for lawmakers, who believe that the SEC is overly cautious regarding decentralization, a concept they argue is fundamental to the country’s founding principles.

In March 2023, the SEC further escalated concerns by suing Justin Sun and associated entities for offering BitTorrent (BTT) through unregistered monthly airdrops. Emmer and McHenry referred to these instances in their correspondence, highlighting the SEC’s approach and its potential chilling effect on technology advancement. They emphasize that a misguided application of securities laws could stifle the full realization of decentralization in blockchain technology.

The lawmakers have posed five inquiries to Gensler, demanding responses by September 30. Their questions focus on the SEC’s interpretation of airdrops within the context of the Howey test, the distinction between airdrops and conventional rewards like credit card points, and the broader implications for economic growth and taxation. They argue that the SEC’s restrictions on participation in airdrops may limit the American public’s ability to benefit from blockchain advancements.

This correspondence is part of a broader critique, as these lawmakers have previously expressed concerns regarding Gensler’s leadership of the SEC, questioning the agency’s hiring practices and potential biases. The SEC has not yet provided a response to the latest inquiries.