Lobbyists from the Blockchain Association and Crypto Council oppose the SEC in the Beba token airdrop case

What’s new? US lobbying NGOs Blockchain Association and Crypto Council for Innovation have filed a statement of claim against the Securities and Exchange Commission (SEC). The lawsuit was filed in March of this year by the clothing brand Beba and the DeFi Education Fund, an educational and advocacy group. The reason was the regulator’s suspicion that airdrop issued Beba tokens to reward customers violates securities laws.

Source: X.com

What else is known? The plaintiffs argue that airdrop does not meet the criteria of the Howey Test and therefore cannot be considered an investment contract. This test began to be used in 1946 and consists of four items: investment, common enterprise, reasonable expectation of profit, and the efforts of others. In other words, the SEC recognizes an asset as a security if investors expect to receive a return on their investment in a company or token managed by third parties.

Beba and DeFi Education Fund insist that airdrop does not fall within the definition of a security because it does not meet the reasonable expectation of profit test. Overall, by filing the lawsuit, they are seeking clarity from the SEC on the regulation of airdrops.

There is widespread agreement in the crypto industry and beyond that the SEC is overstepping its authority in regulating digital assets through enforcement actions.

Beba and DeFi Education Fund, as well as crypto exchanges Coinbase and Binance, which have themselves previously faced SEC lawsuits, argue that the commission is violating the Administrative Procedures Act. This federal law governs how federal agencies must create and enforce rules.

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The Blockchain Association and Crypto Council defended the plaintiffs in a statement, noting that the SEC is violating Congress’ mandate by regulating cryptocurrency without legislative clarity. The lobbyists added that the SEC’s actions sow confusion and cause “a brain drain” from the United States.

NGOs called the airdrops just “the tip of the iceberg” of the SEC’s deterrent effect on the industry. The organizations said the free token giveaways are one of the most obvious areas where the agency misinterprets the Howey test.

The statement notes that airdrops do not meet the investment test because the event is free to participants, nor do they meet the test of a common enterprise between the issuer and the recipients. Thus, they do not fall within the definition of an investment contract.

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As for the SEC, the regulator filed a motion to dismiss the lawsuit shortly after it was filed. In turn, the Blockchain Association and Crypto Council ask the court to deny the SEC’s motion and hear the case, satisfying the plaintiffs’ claims.

Such participation of third-party organizations in the proceedings is possible within the framework of the legal institution of Amicus curiae, which allows third parties to offer information relevant to the case for consideration by the court.

Jake Czerwinski, a member of Blockchain Association and DeFi Education Fund, noted that similar statements in defense of the plaintiffs were filed by the venture capital firm Variant, where he acts as legal counsel, as well as venture funds Andreessen Horowitz (a16z), Multicoin Capital, Paradigm, and Union Square Ventures. The information was also confirmed by Multicoin general counsel Greg Xetalis.

Source: X.com