Rep. Tom Emmer (R-MN) – In a letter to US Securities and Exchange Commission Chairman Gary Gensler, the House Majority Whip expressed concern about how the regulator views crypto airdrops through the lens of securities laws.
In the letter, signed by House Financial Services Committee Chairman Patrick McHenry (R-NC), Emer cited the lack of a regulatory framework for digital assets in the United States as the reason why Americans are barred from requesting airdrops.
Emmer and McHenry accused Gensler and the SEC of putting their thumb on the scale and preventing Americans from “shaping the next iteration of the Internet.”
“Airdrops will play an important role in encouraging participation in blockchain-based applications, which, in turn, will contribute to the continued development, initial management and ultimate decentralization of these networks,” Emmer said in a statement. “Chairman Gensler's tenure at the SEC has been marked by regulations, and has resulted in widespread uncertainty and few opportunities for Americans.”
Airdrops represent instances where tokens – fungibles and/or non-volatile (NFTs) – are distributed to eligible wallets from a project. They are often done to reward early adopters and contributors, or to incentivize further involvement in a crypto protocol or project.
However, many projects – in an apparent effort to avoid potential regulatory issues – block US citizens from requesting climate websites and/or claims. Some examples of token airdrops that blocked users in the United States in 2024 include Saga, Tensor, and NIM.
One notable example of the SEC calling for airdropped tokens came when the agency charged Tron founder Justin Sun with various securities violations in 2023, along with celebrity endorsements such as Jake Paul and Lindsay Lohan.
Emmer has come up against the SEC on several occasions under Gary Gensler. In November, Eimer accused the Biden administration and the SEC of “executive regulation” until Gensler tweeted that it was “as ineffective as it is incompetent.”
In the new letter, Emmer and McHenry asked Gensler to clarify its position on whether free distribution of unsecured digital assets would trigger the Hawaii test before Sept. 30, and if so, under what circumstances. They also asked how the SEC would differentiate between free rewards and digital asset rewards that are available to individuals.
“As you know, the ethos of crypto and blockchain technology is in decentralization,” they wrote. However, the SEC's regulatory approach seems unlikely to achieve its goal of decentralization.
The congressmen questioned the potential impact on the existence and functionality of blockchain applications if these tokens were classified as securities, and each transaction was subject to SEC oversight.
They also asked whether the SEC had quantified the market impact if any digital assets were to be classified as securities, and whether the SEC had considered the potential negative effects on economic growth and tax revenue of holding windfall assets as securities.
“By preventing Americans from participating in airdrops, the SEC is preventing American crypto users from fully realizing the benefits of blockchain technology,” Emmer said. “The SEC's approach under your chairmanship has only confirmed that the next iteration of the Internet is not designed by Americans or American values, and it is not good for our people.”
Edited by Andrew Hayward.
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