- US Congressmen have written to SEC Chair, Gary Gensler, criticising his approach to the regulation of cryptocurrency airdrops, and seeking clarity on how the regulator came to label airdrops as securities.
- The lawmakers have requested that Gensler provide a response to their questions no later than September 30.
US Congressman, Rep. Tom Emmer, has written to Securities and Exchange Commission (SEC) Chair, Gary Gensler, expressing his concerns about the regulator’s stance on cryptocurrency airdrops, which it currently regards as securities.
Rep. Emmer says the SEC’s stance on airdrops is standing in the way of Americans being able to fully participate in what he calls “the next iteration of the internet”.
The letter, which was co-signed by House Committee on Financial Services Chairman Patrick McHenry, also asked for clarification from Gensler around how the SEC came to the position that airdrops are securities and whether the regulator has conducted any internal analysis of the economic impact of its position.
Emmer and McHenry have requested that Gensler respond to their letter by no later than September 30.
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Poor Regulation Harming Americans’ Access to Airdrops
In their letter, Emmer and McHenry highlighted the importance of airdrops for crypto, saying that they “play a crucial role in the development of a decentralised blockchain ecosystem.” However, because of the SEC’s stance on airdrops many projects block US citizens from accessing airdrops in an effort to avoid potential legal issues.
Emmer and McHenry pointed out that the SEC’s current approach to crypto regulation is, in many cases, limiting Americans’ ability to participate in Web3 ecosystems and preventing airdrops from having their intended decentralising effect.
The letter states: “As you know the ethos of crypto and blockchain technology is premised on decentralisation. Yet, the SEC’s regulatory approach seems to make the goal of decentralisation impossible to obtain.”
By creating a hostile regulatory environment, including making assertions about airdrops in various cases and increasing warning for additional enforcement actions, the SEC is putting its thumb on the scale and precluding American citizens from shaping the next iteration of the internet.
Rep. Tom Emmer and Rep. Patrick McHenry in Letter to SEC Chair Gary Gensler
Lawmakers Seek Answers from Gensler
In addition to criticising its regulatory stance, Rep. Emmer and McHenry posed several questions to Gensler, hoping to get some clarity around the SEC’s stance on airdrops.
The congressmen noted that in recent court cases the SEC had accepted that digital assets aren’t “in and of themselves” securities, but somehow it now claims that when these same digital assets are given away for free they become securities, leading the lawmakers to ask:
Does the SEC believe that giving away non-security digital assets for free implicates the Howey Test? If so under what circumstances and arrangements?
Rep. Tom Emmer and Rep. Patrick McHenry in Letter to SEC Chair Gary Gensler
The letter also sought clarity around how and why airdrops differ from more traditional rewards programs such as frequent flyer miles, asking “how does the SEC distinguish between these rewards, given away for free, and digital assets airdropped to an individual?”
Interestingly, Emmer and McHenry also sought any analysis the SEC has regarding the economic impact of its regulatory stance, asking Gensler if the regulator has ever modelled the impact on both the crypto market and the broader economy of labelling digital assets more generally, and airdrops in particular as securities.
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The lawmakers fired a parting shot at Gensler, saying the SEC’s approach to crypto regulation under his watch “has only ensured that the next iteration of the internet is not designed by Americans or with American values, which is not to the benefit of our constituents.”
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