Top Republicans ask SEC why Americans are blocked from participating in crypto airdrops

• A US congressman and the chairman of the House Financial Services Committee are calling on SEC Chairman Gary Gensler to provide clarity on the airdrops.
• SEC Chairman Gary Gensler faces the question of how the agency believes the Howey test applies to free crypto tokens sent to users.
• Ethereum decentralized re-staking protocol Eigenlayer and meme coin projects such as Simon’s Cat launched tokens in 2024.

Crypto market participants in the United States are excluded from airdrops for legal reasons. Airdrops occur when crypto projects distribute their tokens to holders in a free or discounted way, sending them directly to the wallet address or inviting eligible users to claim these crypto assets.

Top Republican congressmen Tom Emmer and House Financial Services Committee Chairman Patrick McHenry wrote a letter to US Securities and Exchange Commission (SEC) Chairman Gary Gensler about the status of airdrops in the US.

The two members of Congress are demanding answers to five questions, including why the SEC blocked US citizens from participating in crypto airdrops and how the “Howey Test” (a test used to determine whether an asset is a value) applies to these types of free tools. digital assets sent to users.

The SEC’s answers to the questions could shape the future of crypto regulation, adoption and US trader participation in airdrops.

Congressmen Demand Answers: Are Crypto Airdrops Securities?

Two top Republicans have given SEC Chairman Gary Gensler until September 30 to answer their questions about crypto air transfers and why US citizens are blocked from claiming them. Airdrops are usually part of the marketing effort for crypto projects that send digital assets to eligible users who interact with or drive early-stage cryptocurrency adoption.

The launch of several Ethereum scaling projects or Layer 2 protocols in recent months have included airdrop campaigns. Cryptocurrency traders in the US were banned from participating.

The highlight of the letter is the request for an analysis of whether the SEC has quantified the market impact of crypto-airdrops and how airdrops from crypto-marketing campaigns differ from, for example, free airline miles.

Letter to SEC Chairman Gary Gensler

The SEC uses the Howey test to determine whether an asset is a security. This has been applied to regulatory lawsuits against Ripple and Terra Labs in the past. Republican leaders are asking the regulator how that test applies to crypto token airdrops and whether they are considered securities.

Cryptocurrency traders in the US are awaiting the SEC’s answers to the questions, as they could have a direct impact on their ability to participate in future air chains of projects like EigenLayer, an Ethereum re-staking protocol, or meme coins like Simon’s Cat.

Both members of Congress criticized the US financial regulator for this “reluctance to establish a regulatory framework in the United States.”