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House Republicans Press SEC Chair Gensler on Crypto Airdrops
U.S. Representatives Tom Emmer and Patrick McHenry are demanding answers from SEC Chair Gary Gensler on the agency’s stance regarding crypto airdrops. The lawmakers sent a letter on September 17, urging Gensler to clarify how the SEC classifies airdrops, with a deadline for a response by the end of the month.
They are scared to death of decentralization because it restores what this country was built on, which is by the people from the ground up. Said Tom Emmer.
Concerns Over SEC’s Approach to Airdrops
Emmer and McHenry raised concerns about recent SEC lawsuits involving crypto airdrops. They argue that the SEC is hindering innovation by overregulating and that this could limit the potential of decentralized technologies.
One key case cited is the SEC’s September 2022 lawsuit against Hydrogen Technology Corporation, which involved the distribution of Hydro tokens through airdrops. The SEC labeled these as “unregistered securities.” Another case from March 2023 involved Justin Sun and his company distributing BitTorrent (BTT) tokens via unregistered airdrops, according to the SEC.
Lawmakers Demand Clarity
The lawmakers’ letter asks Gensler to address five key questions, including how free crypto distributions fit the Howey test—a framework used to determine if something is a security—and how the SEC distinguishes airdrops from other forms of rewards like credit card points. They also asked about the economic and tax implications if airdropped tokens are classified as securities.
Political Tensions with Gensler
This letter marks the second time in a week that Republican lawmakers have criticized Gensler. A prior letter accused him of hiring employees with specific political leanings, raising concerns about bias within the SEC. The SEC has not yet responded to these claims.
Note: The Howey test is a legal test used to determine whether a transaction qualifies as an investment contract and thus a security under U.S. law.
