SEC Chair Gary Gensler faces pressure from U.S. Representatives Tom Emmer and Patrick McHenry, who are demanding answers about the agency’s handling of crypto airdrops. Gensler has until September 30 to respond.
SEC’s Controversial Stance on Airdrops
Emmer and McHenry voiced their concerns in a letter dated September 17. They are worried about the SEC’s recent actions against airdrops. The SEC has taken legal action in several cases, which the lawmakers believe could stifle innovation.
In 2022, the SEC sued Hydrogen Technology Corporation and its former CEO. The SEC accused them of manipulating the market with Hydro tokens, distributed via airdrops. The SEC considered these airdrops as “unregistered offers and sales of securities.”
Then, in March 2023, the SEC targeted Justin Sun and other firms for offering BitTorrent (BTT) through unregistered monthly airdrops. Emmer and McHenry highlighted these cases as examples of the SEC’s heavy-handed approach.
“We fear that misapplying securities laws could prevent this technology from reaching its full potential,” they wrote.
Questions for Sec Chairman Gary
The lawmakers have outlined five key questions they want Gary to answer by the end of the month. They want to know how free crypto airdrops fit into the Howey test and how the SEC distinguishes these from other types of rewards, like credit card points.
They’re also interested in the potential effects on blockchain applications, economic growth, and tax revenue if airdropped tokens are considered securities. Additionally, they want to know if the SEC has assessed the broader market impact of classifying cryptocurrencies as securities.
“By banning airdrops, the SEC is preventing Americans from fully benefiting from blockchain technology,” Emmer and McHenry said. They believe that this approach might exclude American values from shaping the future of the internet.
Political Scrutiny of Gensler
This demand for clarity is the latest in a series of challenges to Gensler’s leadership. On September 10, several GOP lawmakers, including McHenry, questioned whether Gary’s political affiliations influenced SEC hiring decisions. They alleged that the SEC might be hiring individuals from left-leaning organizations, which could compromise the agency’s impartiality.
The SEC has not yet responded to this latest request from Emmer and McHenry.
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