The lawsuit further contended that the SEC’s regulation-by-enforcement strategy violated the Administrative Procedure Act (APA).
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To elucidate the status of airdrops as non-securities offerings, the Texas-based apparel company Beba LLC and the crypto advocacy group DeFi Education Fund have joined forces to file a lawsuit against the US SEC.
The SEC’s regulatory actions, which the two entities view as an overreach into the emerging industry, must be stopped, according to the court filing dated March 25.
The DeFi Education Fund claims that:
“The crypto industry is facing an existential threat from an overzealous regulator who is abusing its power by targeting our industry through unending aggressive enforcement actions. It’s time for the court to put an end to it.”
As such, the lawsuit asks the court to rule that tokens that were airdropped are not securities. It also seeks to stop the SEC from taking additional enforcement action in the industry.
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“Airdrops come at no cost”
Chief Legal Officer of DeFi Education Fund Amanda Tuminelli revealed that Beba was concerned about possible SEC investigation over its BEBA token airdrop.
Beba filed a lawsuit against the SEC to prove that the BEBA token airdrop is not a security in order to allay this worry. The company cites a number of reasons for this, including the lack of financial investment, the absence of shared enterprise, the absence of a realistic expectation of profit, and the lack of a plan or contract.
The lawsuit stated:
“The BEBA token airdrops are free, there is no common enterprise between Beba and token recipients, and there is no reasonable expectation of profits based on the efforts of others.”
Infractions of the APA
In addition, the lawsuit claims that the Commission, led by Gary Gensler, violated the Administrative Procedure Act (APA) by establishing a policy that declared that the majority of transactions involving digital assets are considered securities transactions and that nearly all digital assets are investment contracts.
Tuminelli claims that the SEC’s enforcement actions against players in the nascent industry have consistently followed this pattern. She stated that the SEC “knows they will face a massive backlash” and “that Congress hasn’t given them the authority to cast such a wide net,” which is why they haven’t released comprehensive guidelines for the industry.
She added:
“The SEC’s enforcement activities, whether they be subpoenas, secret investigations, or complaints filed in federal court, are unlawful and pose an existential threat to our future. They have to be stopped.”
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