Category: NFT News

SEC Faces Lawsuit Seeking To Exempt Airdrops From Securities Classification

The DeFi Education Fund teamed up with Beba Collection, a small apparel company, in a bid to get regulatory clarity from the courts on airdrops.

The U.S. Securities and Exchange Commission is facing a lawsuit challenging its ability to treat airdropped tokens as securities.

On March 25, The DeFi Education Fund (DEF), a web3 advocacy organization, announced it had teamed up with Beba Collection, a Texas-based apparel company, to sue the SEC to try and get a U.S. court to rule that the BEBA token does not comprise a securities investment contract.

Beba, which airdropped its BEBA token to Unisocks and early Base Name holders, has not received a complaint from the SEC but is pre-emptively seeking a court ruling protecting its token from securities classification. The SEC has notoriously pursued an aggressive campaign of regulation-by-enforcement targeting digital asset issuers in recent years, claiming that digital assets comprise securities assets.

The DEF asserts that BEBA does not comprise an investment contract according to the Howey Test — a series of four questions used to determine whether an asset comprises a security. Howey describes that “investment contracts” require an “investment of money” between parties, meaning BEBA does not comprise a security asset due to it being distributed via airdrop, according to the complaint.