United States: Republicans Defend Crypto Airdrops Against A Hostile SEC

In the world of crypto, airdrops have become unavoidable, but the Securities and Exchange Commission (SEC) does not view this rain of tokens favorably. To them, these free distributions are disguised sales. In response to this offensive, two influential members of the U.S. Congress, Patrick McHenry and Tom Emmer, are demanding clear answers from the SEC on the distinction between airdrops and loyalty programs.

The SEC, at the center of tensions with elected officials 

Patrick McHenry, chairman of the House Financial Services Committee and author of a call for the United States to take the lead on Bitcoin, and Tom Emmer, majority whip in the House, do not mince words. In a scathing letter addressed to Gary Gensler, chairman of the SEC, they accuse him of “tilting the scales” by creating a hostile regulatory climate for crypto airdrops.

THANK YOU!

Tom Emmer and Patrick McHenry sent a letter asking Gensler why he's blocking US Citizens from Airdrops.

Has the SEC considered the cost to GDP and tax revenue?

Absolutely ridiculous that Gensler wants to protect you from free money. pic.twitter.com/VSk0vDsqHf

— RYAN SΞAN ADAMS – rsa.eth 🦄 (@RyanSAdams) September 17, 2024

These token giveaways, considered “disguised security sales“, have become the SEC’s nemesis, especially with the Justin Sun TRON case. Even though he had been allowed to strengthen his defense last year.

For these lawmakers, the SEC is going too far by labeling airdrops as securities distributions. They even cite specific examples to support their points:

• The case of TRON (TRX) and Justin Sun in 2019;
• The SEC’s increasing warnings about future lawsuits;
• The pressure on crypto startups to exclude Americans from these operations.

In their missive, McHenry and Emmer are asking the SEC to clarify its stance by the end of the month, specifically on the difference between airdrops and simple loyalty programs like credit card points or airline miles.

A regulatory war shaking up crypto

The battlefield is well-defined: on one side, an uncompromising SEC; on the other, pro-crypto lawmakers seeking to redefine the landscape. According to them, by excluding Americans from airdrops, the SEC deprives crypto users of fully enjoying blockchain technologies.

But that’s not all; McHenry and Emmer are preparing a bill for better structuring the crypto market.

This initiative aims to redefine the jurisdiction between the SEC and the Commodity Futures Trading Commission (CFTC), to prevent the SEC from stifling innovation. McHenry and Emmer accuse Gensler of considering most cryptocurrencies as securities, which would force crypto exchanges, like Kraken in turmoil, to comply with the financial watchdog’s demands.

The next round will take place during congressional hearings, where the SEC will be scrutinized.

While the SEC intensifies its crackdown on these practices, voices are rising to reinvent crypto airdrops. Vitalik Buterin recently proposed integrating blockchain identity for greater fairness.