US Representatives pens letter to SEC Chair Gary Gensler urging clarity on stance on crypto airdrops.
A September 17 letter co-signed by Representatives Patrick McHenry and Tom Emmer seeks a definitive response from the Commission chair on the agency’s stance on digital assets-affiliated airdrops.
In his capacity as chair of the House Committee on Financial Services (HCFS), Rep. McHenry (R-NC) teams with the House Majority Whip Rep. Emmer (R-MN) to express concerns about how the securities watchdog disadvantaged Americans. The duo questions how the SEC views crypto airdrops through the lens of securities law.
Why Deny Access to Airdrops?
The Republican lawmakers decry the absence of a regulatory framework on digital assets in the US. The letter indicates that such constitutes why projects are blocking US citizens from claiming their rightful airdrops.
Emmer and McHenry seek clarification on the matter, though they further accuse Gensler of overseeing the agency of putting its thumb on the scale to bar Americans from the next iteration of the internet.
Airdrops have critical input towards incentivizing user participation in blockchain-based applications. In turn, such applications yield subsequent development, participative governance, and decentralization of the underlying networks, Emmer disclosed in the statement.
Emmer points out that Chairman Gensler’s tenure at the agency portrays regulation by enforcement. Such an approach results in widespread uncertainty and diminishing opportunities for Americans.
Airdrops involve instances where the project distributes tokens – both fungible and non-fungible – to the eligible wallets. Airdrops are executed to reward the early contributors and users to the project. Additionally, airdrops incentivize further engagement with the protocol.
Multiple projects have recently barred US citizens from the airdrop websites to avoid potential regulatory battles with the SEC. The eligibility restrictions deny the citizens a participative platform, as witnessed in recent token airdrops, including Saga, Tensor, and NIM.
Emmer and McHenry’s letter emerges following the prominent incident when the SEC questioned airdropped tokens when charging the Tron blockchain founder Justin Sun. The agency alleged securities violations last year by Sun alongside Jake Paul and Lindsay Lohan, which were identified according to celebrity endorsement of the airdrop.
Emmer has decried the SEC conduct under Gensler’s reign on several occasions. Emmer declared in November last year that the Biden Administration and SEC were orchestrating regulation by enforcement. The crypto assets advocate declared Gensler on X (formerly Twitter) ineffective and incompetent.
The latest letter features a request for clarity on the SEC’s stance by the end of this month on whether the distribution of freely earned non-security digital assets triggered the Howey test and under what conditions. The letter seeks the agency to differentiate the free rewards and digital assets airdropped to participants in a particular project.
https://x.com/GOPMajorityWhip/status/1836115476558066025
Congressmen Questions SEC Hindrances to Decentralization
The two lawmakers reiterated that crypto and blockchain technology ethos is premised on decentralization. Nevertheless, the regulatory approach deployed by the Commission appears to attack the realization of the decentralization objective.
The congressmen inquired about the likely impact of the SEC’s stance on the functionality and existence of on-chain applications if airdrops are securities. They sought to know the potential implications when each transaction involving airdrops is subjected to the agency’s scrutiny.
The Congressmen sought to know whether the Commission had already quantified the potential market impact should the digital assets be classified as securities. The letter questioned whether the SEC factored the adverse effects on the economic growth and generation of tax revenue from classifying airdropped crypto assets as securities.
The HCFS chair indicated that imposing eligibility restrictions on Americans denies them participation in the airdrops. By doing so, the SEC hinders American crypto users from optimizing the benefits of blockchain technology.
Emmer added that the Genslers reign at SEC features an approach that locks out Americans from subsequent internet interaction. The absence of American values in such designs ensures they do not benefit the US constituents.
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