Emmer and McHenry Press Gensler to Clarify SEC's Stance on Crypto Airdrops

Two Republican lawmakers are pressing U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler to clarify the agency's stance on crypto airdrops.

Two U.S. lawmakers are urging Securities and Exchange Commission (SEC) Chair Gary Gensler to clarify the agency’s stance on crypto airdrops. Representatives Tom Emmer and Patrick McHenry sent a letter on Sept. 17, expressing concerns about the SEC’s classification of airdrops.

The move comes amid several legal actions undertaken by the SEC involving airdrops. In 2022, the agency sued Hydrogen Technology Corporation for allegedly manipulating the market through the distribution of over 11 billion Hydro tokens via airdrops, which the SEC called an unregistered securities offering. Earlier this year, the SEC also sued Justin Sun and other firms for allegedly conducting an unregistered airdrop of BitTorrent tokens (BTT).

Emmer and McHenry, both Republicans, argue in their letter that misinterpreting securities laws could hamper the potential for blockchain technology’s decentralization. They highlighted the importance of airdrops in the crypto ecosystem, often used to distribute new tokens or coins to a wide range of participants in the network.

The lawmakers have asked Gensler to address five questions by the end of September, including how airdrops, which are typically given for free, align with the Howey test used to define securities. They also inquired about the broader economic impacts if airdropped tokens are classified as securities.

“Specifically, we are concerned that the SEC’s current approach to airdropped tokens will stifle U.S. citizens’ ability to benefit from blockchain innovations and allow other countries to lead the development of new internet technologies,” the lawmakers wrote.

Emmer further criticized the SEC’s approach in a tweet, saying it stifles U.S. citizens from benefiting from blockchain innovations and risks allowing other countries to lead the development of new internet technologies.

This letter marks the second time in a week that GOP lawmakers have challenged Gensler. Earlier, on Sept. 10, some Republicans questioned whether his political leanings influenced SEC hiring decisions, accusing the agency of prioritizing left-leaning candidates for senior roles. The SEC has not yet responded to the recent letter.