In a recent letter addressed to SEC Chair Gary Gensler, House Majority Whip Tom Emmer and House Financial Services Committee Chairman Patrick McHenry expressed concerns about the Securities and Exchange Commission’s (SEC) treatment of airdrops as securities. They emphasized the significance of airdrops in the blockchain ecosystem, describing them as distributions of digital assets to early users of a blockchain protocol, essential for the decentralized blockchain ecosystem’s development.
Emmer and McHenry criticized the SEC’s approach under Gensler’s leadership, accusing the agency of creating a hostile regulatory environment that hampers blockchain growth. They raised questions regarding the SEC’s interpretation of securities law in relation to airdrops, particularly concerning the application of the Howey Test to digital assets given away for free.
The lawmakers also questioned the SEC’s distinction between digital asset airdrops and other forms of consumer rewards, like airline miles or credit card points, in terms of the Howey Test. They voiced concerns about the broader implications of classifying digital tokens as securities on the blockchain ecosystem, warning that it could impede on-chain applications’ functionality.
Furthermore, Emmer and McHenry requested information on the economic impact of classifying digital assets as securities, including potential loss of economic growth and tax revenue. They highlighted how developers are already restricting American users from participating in airdrops due to SEC regulations.
The lawmakers urged Gensler to respond to their queries by September 30, 2024, as the SEC prepares for a congressional hearing on crypto regulation bias scheduled for September 18, 2024.