Morrison Cohen Files Amicus Brief on Behalf of The Crypto Council for Innovation and Blockchain Association in Support of Lawsuit Against SEC Related to Airdrops
On October 28, 2024, Morrison Cohen, on behalf of clients The Crypto Council for Innovation and Blockchain Association, filed an amicus curiae brief in the Western District of Texas in support of Beba LLC (“Beba”) and DeFi Education Fund in their lawsuit against the SEC and its Chair Gary Gensler.
In the underlying litigation, Plaintiffs describe how Beba is a small apparel company that created its own token and airdropped it for free to raise awareness and excitement for Beba. Plaintiffs allege that the SEC has, contrary to applicable law, labeled airdropped tokens like Beba’s as securities, which in turn has hamstrung companies like Beba.
The amicus explains how “airdrops” of digital assets are utilized across the broader digital assets industry. The amicus summarizes the many different types of airdrops, and describes how typically the recipient does not pay for the airdropped token. The amicus argues that the SEC’s position that airdropped tokens generally are securities is inconsistent with the Supreme Court’s Howey test for determining whether a given instrument is an investment contract and therefor a security, as there is no “investment of money” and no “investment contract.”
Furthermore, the amicus argues that airdrops are just the tip of the iceberg. More generally, “the SEC’s strategy of ‘regulation by enforcement’ has caused a significant amount of uncertainty in the digital asset industry, leading to a brain drain of digital asset talent and businesses away from the United States.”
Jason Gottlieb, Michael Mix and Emma McGrath drafted the amicus brief.
Contacts
- Jason P. Gottlieb Partner & Chair, Digital Assets; Chair, White Collar and Regulatory Enforcement
- jgottlieb@morrisoncohen.com
- Michael Mix Partner
- mmix@morrisoncohen.com
- Emma E. McGrath Associate
- emcgrath@morrisoncohen.com
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