Washington D.C.-based Crypto Lobbying Firms Support Legal Challenge Against SEC

The Blockchain Association and the Crypto Council for Innovation have filed a "friend-of-the-court" brief in support of a lawsuit against the U.S. Securities and Exchange Commission (SEC) regarding the need for clear regulations on token airdrops.

In the 30-page amicus brief, these non-profit organizations argue that a judge in the Waco District Court should compel the SEC to respond to claims made by Beba, an American clothing brand that distributed tokens to reward shoppers, and the DeFi Education Fund. They assert that airdrops do not infringe upon securities laws.

In March, Beba and the DeFi Education Fund sued the SEC, contending that token airdrops do not violate the Howey Test—a legal standard from nearly a century ago to determine if a transaction represents an "investment contract"—since there is no reasonable expectation of profit involved.

The Blockchain Association and Crypto Council's lawyers stated in their brief: "The first prong of the Supreme Court’s Howey test… requires a court to find that there has been an 'investment of money.' In an airdrop, there is no investment of money because the recipient generally receives a token for free."

Marisa Tashman Coppel, Head of Legal at the Blockchain Association, emphasized on X, "SCOTUS means what it says by this – money means money."

'Tip of the Iceberg'

Beba’s lawsuit is among several legal actions taken by crypto participants seeking clarity from the SEC, which has been criticized for "regulating by enforcement" instead of establishing clear guidelines. SEC Chairman Gary Gensler has indicated that nearly all cryptocurrencies fall under securities regulations, asserting that blockchain firms must register with the agency.

Critics argue that the SEC is exceeding its authority in regulating cryptocurrencies, suing major crypto firms both in the U.S. and abroad. Beba and the DeFi Education Fund, along with exchanges like Coinbase and Binance, claim that the SEC violates the Administrative Procedures Act, which governs how federal agencies create and enforce regulations.

The Blockchain Association and Crypto Council assert that the SEC's actions contradict its congressional mandate by regulating crypto without clear legislative authority. They report that the SEC’s stance is creating confusion and leading to a “brain drain” of talent from the U.S.

Both organizations characterize airdrops as merely "the tip of the iceberg" in relation to the SEC’s restrictive impact on the crypto industry. They further argue that token giveaways exemplify the agency’s misinterpretation of the Howey Test; since there is no exchange of funds, there is no investment or "common enterprise" between issuers and recipients.

The SEC promptly filed a motion to dismiss Beba’s lawsuit. The Blockchain Association and Crypto Council are urging the court to reject this motion and endorse the plaintiffs’ call for relief.