Republican Lawmakers Seek SEC Chair Gensler’s Clarification on Crypto Airdrop Classification
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Top Republican lawmakers are pressing U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler for clear guidelines on the treatment of crypto airdrops.
In a recent letter, House Financial Services Committee Chair Patrick McHenry (R-NC) and House Majority Whip Tom Emmer (R-MN) criticized the SEC’s handling of the crypto space, specifically targeting its approach to airdrops, a common distribution method used by blockchain startups.
The letter comes as many projects seek to avoid airdrops to U.S. citizens amid regulatory uncertainty.
SEC’s Actions Harm Crypto Innovation
The lawmakers argue that the SEC’s actions create an unfavorable regulatory environment for crypto innovation.
“By creating a hostile regulatory environment, including making assertions about airdrops in various cases and increasing warnings 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,” McHenry and Emmer wrote in their letter to Gensler.
Airdrops are a popular method for distributing free tokens to holders of digital asset wallets, but the SEC has previously indicated that these could be viewed as securities.
The agency highlighted this stance in its 2019 “Framework for ‘Investment Contract’ Analysis of Digital Assets,” suggesting that airdrops could be classified as the sale or distribution of securities.
The lawmakers pointed to the SEC’s case against Tron founder Justin Sun as an example of its aggressive stance on airdrops.
McHenry and Emmer expressed concern that the SEC’s approach has led some crypto projects to block U.S. users from participating in airdrops.
They argued that this undermines the potential benefits of blockchain technology for Americans.
“By prohibiting Americans from participating in airdrops, the SEC is preventing crypto users from fully realizing the benefits of blockchain technology,” they wrote.
The lawmakers requested Gensler clarify how the SEC distinguishes airdrops from similar offerings, such as airline miles or credit card points.
They set a deadline of Sept. 30 for a response. The SEC has yet to comment on the letter.
McHenry and Emmer have long been vocal critics of Gensler’s approach to crypto regulation, accusing him of overreach.
Gensler maintains that most cryptocurrencies should be classified as securities and has urged crypto platforms to register with the SEC.
Upcoming Hearing on SEC Stance
The letter coincides with upcoming hearings in the House Financial Services Committee, where the SEC’s stance on digital assets will be a key focus.
A hearing titled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets” is scheduled for Wednesday, with another oversight hearing planned for next week, where all five SEC commissioners are expected to testify.
Prominent legal figures in the cryptocurrency industry, such as Stuart Alderoty from Ripple and Paul Grewal from Coinbase, have similarly criticized the SEC for its handling of crypto-related cases.
Alderoty described the SEC’s stance on “crypto asset securities” as convoluted and inconsistent, while Grewal highlighted the contradictions in the regulator’s claims, particularly in its case against Ripple involving XRP.
Just recently, a coalition of seven U.S. states came together to challenge the SEC’s regulation of cryptocurrency.
