Top Republican Lawmakers Question SEC’s Stance on Crypto Airdrops

Top Republican lawmakers are seeking clarification on the U.S. Securities and Exchange Commission’s (SEC) views regarding airdrops in the crypto industry.

House Financial Services Committee Chair Patrick McHenry from North Carolina and House Majority Whip Tom Emmer from Minnesota accused the SEC of “putting its thumb on the scale” in a letter addressed to SEC Chair Gary Gensler on Tuesday.

“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,” they stated.

Airdrops are a method used by some crypto startups to distribute free tokens to users’ digital asset wallets. Lawmakers pointed to the SEC’s previous actions regarding airdrops, including its case against Tron founder Justin Sun. They noted that airdrops could potentially be categorized as a “sale or distribution of securities,” as mentioned in a footnote of the SEC’s 2019 “Framework for ‘Investment Contract’ Analysis of Digital Assets.”

Emmer and McHenry expressed concern that developers are being pressured to prevent Americans from partaking in airdrops, arguing that such prohibitions hinder U.S. citizens from reaping the full benefits of blockchain technology.

“By prohibiting Americans from participating in airdrops, the SEC is preventing crypto users from fully realizing the benefits of blockchain technology,” they emphasized.

They posed several questions for Gensler, including how the SEC plans to differentiate between airdrops and rewards like airline miles or credit card points, demanding a response by September 30. The SEC has yet to respond to inquiries regarding this matter.

McHenry and Emmer have been vocal critics of Gensler’s regulatory strategies in crypto, claiming that he has suggested most cryptocurrencies fall under the securities category, urging platforms to register with the agency. Concurrently, they’ve advocated for a crypto market structure bill, aiming to split jurisdiction over crypto between the SEC and the Commodity Futures Trading Commission.

The letter arrives as the House Financial Services Committee prepares to conduct several hearings focusing on the SEC and its cryptocurrency policies. One particular hearing, scheduled for Wednesday, is titled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets,” while another oversight hearing is set for the following week, with all five commissioners expected to attend on September 24.