In a correspondence dated September 2024, House Majority Whip Tom Emmer and House Financial Services Committee Chairman Patrick McHenry expressed their concerns to SEC Chair Gary Gensler regarding the categorization of airdrops as securities. The lawmakers emphasized the significance of airdrops in the blockchain ecosystem, referring to them as distributions of digital assets to early users of a blockchain protocol. They criticized the SEC for its stance, stating that airdrops play a vital role in fostering a decentralized blockchain environment by encouraging participation in blockchain applications and enhancing network decentralization and governance.
Emmer and McHenry questioned the SEC’s under Gensler’s leadership for what they perceive as impeding the growth of blockchain technology through stringent regulatory measures. They argued that the current regulatory environment hampers decentralization efforts and stifles the innovation potential of blockchain technology. The lawmakers raised queries concerning the SEC’s interpretation of securities law in relation to airdrops, particularly whether giving away digital assets for free could trigger the Howey Test, the legal benchmark for determining investment contracts in the U.S.
Furthermore, the letter also addressed distinctions between crypto airdrops and conventional consumer rewards like airline miles or credit card points, questioning the SEC’s differentiation criteria. Emmer and McHenry highlighted the potential adverse effects of classifying digital tokens as securities on the broader blockchain ecosystem, cautioning that the SEC’s regulatory approach could impede the functionality of on-chain applications driven by token consumptive use. They sought information on the economic ramifications of classifying digital assets as securities, including the impact on economic growth and tax revenue, as well as the restrictions on American users’ participation in airdrops due to SEC regulations.
The lawmakers requested a response from Gensler by September 30, 2024, coinciding with an upcoming congressional hearing on crypto regulation bias on September 18.