Two Republican lawmakers are demanding United States Securities and Exchange Commission Chair Gary Gensler answer questions about the classification of crypto airdrops by the end of the month.
Representative Tom Emmer and House Financial Services Committee Chairman Patrick McHenry said in a Sept. 17 letter to Gensler that they’re concerned after the SEC made “assertions about airdrops” in various lawsuits over the last two years.
“The SEC is putting its thumb on the scale and precluding American citizens from shaping the next iteration of the internet.”
In September 2022, the SEC sued Hydrogen Technology Corporation and its former CEO for market manipulation of what it called “crypto asset securities.”
The firm minted over 11 billion Hydro tokens for fundraising and distributed them as airdrops, which the SEC called “unregistered offers and sales of their securities.”
They are scared to death of decentralization because it restores what this country was built on, which is by the people from the ground up. pic.twitter.com/0SgLMN4IBu
— Tom Emmer (@GOPMajorityWhip) September 17, 2024
In March 2023, the SEC sued Justin Sun and other firms, accusing them of offering and selling BitTorrent (BTT) in “unregistered monthly airdrops to investors.”
Emmer and McHenry mentioned both cases in the letter’s footnote as examples of the SEC’s approach to airdrops.
“We are concerned that a misapplication of the securities laws will prevent this technology from achieving decentralization to its full potential,” the lawmakers wrote.
Source: Tom Emmer
Emmer and McHenry demanded Gensler answer five questions relating to crypto airdrops by Sept. 30, including how crypto “given away for free” falls under the Howey test and how the SEC distinguishes airdrops from other rewards like credit card points.
They also asked what the impact on onchain applications, economic growth and tax revenue would be if airdropped tokens were classed as securities and if the regulator had assessed the market impact of classifying cryptocurrencies as securities.
“By prohibiting Americans from participating in airdrops, the SEC is preventing American crypto users from fully realizing the benefits of blockchain technology,” Emmer and McHenry wrote.
“The SEC’s approach during your time as Chair has only ensured the next iteration of the internet is not designed by Americans or American values, which is not to the benefit of our constituents.”
It’s the second time in a week that Republican lawmakers have targeted Gensler over how he’s run the agency.
Related: Ex-SEC officials to speak at hearing on ‘politicized approach’ to crypto
On Sept. 10, several GOP lawmakers questioned Gensler — a Democrat — on whether his political affiliation has influenced hiring at the SEC.
In a letter to Gensler, the lawmakers, including McHenry, accused the agency of hiring “individuals from left-leaning organizations to fill senior roles at the SEC.”
“If these allegations are true, the SEC is violating the Civil Service Reform Act to fill the agency with employees who possess a particular ideology, which undermines the SEC’s purported impartiality,” they added.
The SEC did not immediately respond to a request for comment on the latest letter.