DeFi Fund, Texas Apparel Company Sues Airdrops to Defend SEC

Beba, a Texas clothing company run by African immigrants, and the Diffie Education Fund are challenging possible actions by the U.S. Securities and Exchange Commission, seeking a declaratory judgment from the U.S. District Court in West Texas to protect the company's recently issued BEBA tokens. In a lawsuit filed March 25, the plaintiffs asked the court to clarify the limits of the SEC's authority in light of the Administrative Procedures Act (APA).

Beba has created 100,000 BEBA tokens and has so far issued 60,880 in the air, according to the lawsuit. The tokens are intended to be freely traded and their value is expected to increase. The SEC continued that “BEBA tokens are investment contracts and that the airport is a securities transaction that meets the registration requirements under the Securities Act of 1933.”

However, the plaintiffs argue that token recipients do not qualify for Weather or take any action that does not involve any “meaningful consideration, such as following Beban on social media.” Therefore, there is no common organization in the air drop. Beba also did not promise to take steps to increase the value of the token. Therefore, they argued, the airdrop did not represent a contract under the Hawaii test.

Token holders are eligible for discounts on items sold by Beba. He compared that offer to a customer loyalty program.

Related: DeFi Group Petitions to End ‘Proprietary' Targeting of DeFi Protocols

In addition to defending the airdrop, the suit also challenged SEC policies under Chairman Gary Gensler. The SEC argues that it violates the APA, because the law says that when agencies enact new rules, they must do so openly, transparently and with public input. Required charge:

“A statement given by the accused [the SEC] It violated the APA both procedurally and substantively when it adopted a new unwritten policy that virtually all digital assets are securities and that most securities transactions involving digital assets are securities.

It also asked the court whether it should vacate the said policy or restrain the SEC from enforcing it.

Coinbase also argued that the SEC is violating the APA by requesting a rulemaking from the SEC.

Magazine: On… Why aren't more law schools teaching blockchain, DeFi and NFTs?