A DeFi fund and a Texas-based clothing company have initiated a legal challenge against the U.S. Securities and Exchange Commission’s (SEC) attempts to restrict an airdrop of their new tokens.
The lawsuit contended that the tokens were not securities as they were distributed for free and not requested by the recipients.
Beba and the DeFi Education Fund jointly filed a lawsuit in the U.S. District Court for Western Texas to prevent the SEC from taking any action against Beba’s recent airdrop of BEBA tokens.
Initiated on March 25, the plaintiffs also sought court intervention to define the boundaries of the SEC’s jurisdiction by the Administrative Procedures Act (APA).
According to the details of the lawsuit, Beba had created a total of 100,000 BEBA tokens, of which 60,880 had been distributed to date.
The tokens were intended for free trading, with the expectation that their value would appreciate over time.
The SEC “will take the position that BEBA tokens are investment contracts and that the airdrop is a securities transaction subject to registration requirements under the Securities Act of 1933,” it continued.
The plaintiffs argued that the BEBA tokens were distributed to users who took no action other than owning a digital wallet into which the tokens were airdropped, and there was no “meaningful consideration,” such as “following” Beba on social media.
They further argued that there was no common enterprise and no promise to increase the value of the tokens.
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The lawsuit likened the discount for token-holders to a customer loyalty program, where customers could earn discounts on a retailer’s goods by signing up.
In addition to defending the airdrop, the lawsuit raised concerns about SEC policies under Chair Gary Gensler.
It argued that the SEC breached the APA by failing to adhere to its requirements, which mandated agencies to formulate new rules transparently, clearly, and with public input.
The suit sought:
“A declaration that Defendant [the SEC] violated the APA, both procedurally and substantively, when it adopted a new unwritten policy that nearly all digital assets are securities and the majority of transactions involving digital assets are securities transactions.”
The suit requested the court to strike down the SEC’s purported policy or at least bar the agency from enforcing it.
Coinbase filed a separate suit against the SEC, claiming that the agency had violated the APA by failing to define clear rules regarding digital assets.
