Fintech supporter Congressman Tom Emmer has sent a letter to the Chair of the SEC, Gary Gensler, asking the Commission to clarify the “regulatory classification of digital asset airdrops.” The Chairman of the House Financial Services Committee, Patrick McHenry, has also added his support to the missive
Airdrops are sometimes used to quickly distribute digital assets to users to establish a user base. These assets may have value beyond utility, but the regulatory environment is a bit opaque.
The letter states:
“We write to better understand the Securities and Exchange Commission’s (SEC) consideration of the status of distributions of digital assets via ‘airdrops.’ Airdrops in this context are distributions of a digital asset to early users of a blockchain protocol. Airdrops used in this capacity are intended to incentivize participation on blockchain-based applications, which contributes to the continued development, initial governance, and ultimate decentralization of these networks. As such, airdrops play a crucial role in the development of a decentralized blockchain ecosystem. We are concerned that a misapplication of the securities laws will prevent this technology from achieving decentralization and its full potential.”
The Congressional request then outlines a series of questions they ask Chair Gensler to illuminate the SEC’s position. The lawmakers ask if the SEC views Airdropped digital assets as securities under the Howey Test while noting that other businesses frequently provide user rewards or points.
The letter ends by cautioning Chairman Gensler that by creating obstacles for innovators, the “SEC is preventing American crypto users from fully realizing the benefits of blockchain technology.”
The SEC frequently states that it is technology-neutral. At the same time, Chairman Gensler has repeatedly said that all digital assets are securities, perhaps with the exception of Bitcoin and Ethereum. Recently, the SEC has pursued multiple enforcement actions against NFTs or non-fungible tokens, which are frequently viewed as collectibles.
Chairman Gensler is asked to respond no later than September 30, 2024.
