Congressman Tom Emmer calls for clarity on Crypto Airdrops

On September 17, Minnesota Representative Tom Emmer, along with House Financial Services Committee Chairman Patrick McHenry, wrote to SEC Chairman Gary Gensler asking for clarity on whether crypto airdrops are securities transactions. .

“Under Chairman Gensler’s tenure, the SEC has put its thumb on the scale and prevented Americans from shaping the next iteration of the Internet,” he said.

The MP added that airdrops play an important role in encouraging participation in blockchain-based applications. This contributes to the continued development, initial governance and eventual decentralization of these networks, he added.

The future of the peer-to-peer digital economy cannot be left to the authoritarian whims of @GaryGensler.

today, @PatrickMcHenry and I am seeking answers from the SEC regarding their position that airdrops are securities transactions. pic.twitter.com/UFm7ymdEaj

— Tom Emmer (@GOPMajorityWhip) September 17, 2024

Clarity Airdrop

The House Majority Whip explained that because of the “cloudy regulatory status of airdrops in the United States,” developers often prevent Americans from claiming these tokens, even when those people may have been building in the network or otherwise contributing to its development.

An airdrop is when a crypto project sends free tokens directly to network participants to attract users to the platform. They are similar to loyalty rewards, such as airline miles or credit card rewards.

However, the SEC has raised the possibility in recent enforcement actions against crypto companies that airdrops could qualify as securities.

Emmer and McHenry said they are “concerned that poor enforcement of securities laws will prevent this technology from achieving decentralization and its full potential.”

The letter asks for answers to five questions, including how the SEC distinguishes between rewards such as airline miles and crypto airdrops and how the agency believes the Howey test applies to free crypto tokens given to users.

The legislators concluded:

“The SEC’s approach during your time as chairman has only ensured that the next iteration of the Internet is not designed by Americans or with American values, which does not benefit our constituents.”

The letter requested a response from the securities regulator by September 30.

Pump and dumps

One of the main concerns with airdrops is their pump-and-dump nature, as assets that have been airdropped tend to sell off fairly quickly.

This has been seen with some of the most notable cases in recent years, such as Uniswap (UNI) which is down 85% from its peak, Apecoin (APE) which is down 97% and dYdX down 80%.

Two other massive dumps came after Ethereum Name Service (ENS) was launched, hitting $80 before falling below $20 a few months later, and the same with Internet Computer (ICP), which surged to $700 after launch, but has since collapsed 99%.

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