Key Takeaways
- A lawsuit against the US securities regulator is seemingly aiming to establish a legal precedent.
- The suit argues that the BEBA token airdrop does not violate securities laws because it was not sold to recipients in any way.
- The lawsuit could set a regulatory precedent for airdrops.
A decentralized finance (DeFi) crypto policy and advocacy group has launched a lawsuit against the United States Securities and Exchange Commission (SEC) to pre-emptively go on the offensive against the regulator amid the BEBA airdrop.
Now, it looks the crypto industry is adopting the shoot-first-ask-later approach to filing suits. Indeed, the SEC has become notorious for in its numerous lawsuits against cryptocurrency issuers using similar tactics. But is there any practicality to this, or is this an ingenious publicity stunt?
Airdrops Aren’t Securities
Instead of waiting for the SEC to sue it, a small apparel company based in Texas has, alongside the DeFi Education Fund (DEF), sued the regulator invoking the Declaratory Judgement Act. This allows a party to seek legal assistance before incurring any damages as a result of unjustified enforcement.
As per the Monday 25 Marxh, 2024 filing, the suit aims to secure a court order that would legally validate Beba’s airdrop. It argues that Beba’s distribution of the BEBA token does not violate American securities laws as it was done so for free. It says:
“Beba has engaged and plans to engage in a course of activity that is, in fact, compliant with securities law but that SEC policy has declared unlawful,”
The lawsuit says Beba has already distributed 60,880 of 100,000 tokens, with the intention for them to be freely traded. The SEC may choose to argue that BEBA tokens constitute investment contracts, qualifying the airdrop as a securities transaction.
The suit notes that token recipients either “do nothing to become eligible” or take action that “involves no money or meaningful consideration”, such as, for example following Beba on social media.
Have the Tables Turned?
It is no understatement that the Ripple (XRP) Vs. SEC battle is pivotal for crypto and digital asset. The decision on how to classify tokens and determine at what point of sale they are, or are not, a security, will set a precedent for the entire industry going forward.
Miller Whitehouse-Levine, CEO of the DeFi Education Fund said:
“Every single one of us in this industry, including the DeFi Education Fund, is harmed by their overreach. We are asking the court to put an end to the SEC’s arbitrary abuse of its authority.”
However, a lot of the legal battles between the SEC and other crypto industry players, appear to be efforts to set a historical precedent in the favor of the regulator, a powerful ally in any legal case.
With Beba, the intention seems to potentially create an opening for other companies or projects to do the same as the apparel company.
Publicity or Precedent?
This pre-emptive strike against the SEC from the crypto industry makes for an interesting change. It is a pretty smart publicity stunt if it is one. Nathan Hennigh, co-founder of Beba said in a press release:
“Like any business owner, I’m always thinking about new and innovative ways to reach more customers, grow support for our products, and build more awareness of Beba’s mission,”
This will of course garner attention toward Beba, a small apparel business in Waco, Texas.
On the other side of this coin is what appears to be a legitimate route toward regulatory clarity for crypto, especially around airdrops. This is something the American crypto industry has called, and continues to call , for.
How the SEC responds is still unknown. However, this is certainly one of the more interesting crypto-related lawsuits we’ve seen in recent months.
Eddie is a gaming and crypto writer at CCN. Covering the often weird and wonderful world of Web3 with an adoring, but skeptical eye.
Prior to CCN, Eddie has spent the past seven years working his way through the crypto, finance, and technology industry. He began with PR and journalism with Bitcoin PR Buzz and BitcoinNews.com, eventually working his way to become a copywriter with a dozen firms, including the likes of Polkadot before returning to journalism in 2023.
Having studied Radio production and journalism at University in the UK, Eddie spent a few years making podcasts and presenting on a local London radio station as he built up his writing chops.
A lifelong skateboarder, Eddie can often be found at the skatepark or touring the streets looking for something new to try. That, or kicking back playing JRPGs on his original PSP.
