SEC Faces Lawsuit Over Crypto Airdrops, Defendants Push For Non-Security Status


The US Securities and Exchange Commission (SEC) is facing a new lawsuit that aims to challenge the regulator’s failure to provide a clear regulatory framework for the crypto industry, specifically regarding classifying crypto airdrops as securities. 

The lawsuit, filed by the DeFi Education Fund (DEF) and Beba Collection, an apparel company based in Texas, seeks to prompt the court to rule that the BEBA token does not fall under the category of a securities investment contract.

Lawsuit Targets SEC’s Treatment Of BEBA Token

In their announcement, the DeFi Education Fund expressed concerns over the SEC’s “aggressive enforcement actions,” which they believe pose an existential threat to the crypto industry. The lawsuit focuses on two claims. 

First, Beba Collection requests a declaratory judgment stating that BEBA tokens are not investment contracts and that the free airdrop of BEBA tokens for marketing purposes does not constitute a securities transaction. 


Second, the DeFi Education Fund and Beba argue that the SEC violated the Administrative Procedure Act by adopting a policy that treats nearly all crypto assets as investment contracts and digital asset transactions as securities transactions.

Regarding crypto airdrops, Beba Collection asserts that the free distribution of BEBA tokens does not involve an “investment of money,” a key requirement under the Howey test for determining investment contracts. According to Beba, no investment contract exists since the tokens were given away without monetary investment from recipients.

Crypto Industry Strikes Back

The second claim focuses on the SEC’s compliance with the Administrative Procedure Act (APA), which requires agencies to adopt new rules openly and with public input. 

DEF and Beba argue that the SEC implemented a radical new policy under Chairman Gensler’s leadership without providing the required opportunity for public comment. The DeFi Education Fund further alleged:

Instead, the SEC ramped up its enforcement actions, hired more people to make them happen, and created a “who’s next?” fear in the industry. The natural outcome of the SEC’s actions is: “cross your fingers and hope the SEC does not come knocking on your door.” We can’t allow this state of play to continue.

Ultimately, DEF suggested that the outcome of this case could have significant implications. A ruling in favor of DEF and Beba that the SEC’s approach to crypto violates the APA would be a major obstacle to the SEC’s ongoing “regulatory overreach.” 

Additionally, if the court determines that BEBA tokens are not investment contracts and that free airdrops are not securities transactions, it would provide much-needed clarity to the industry.

As the lawsuit unfolds, the crypto community and industry stakeholders eagerly await the court’s decision, hoping for a favorable outcome that promotes innovation, fosters regulatory clarity, and curtails excessive enforcement actions by the SEC.

The 1-D chart shows the total crypto market cap’s valuation at $2.55 trillion. Source: TOTAL on

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