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SEC faces lawsuit challenging its crypto airdrop rules, seeking clearer industry guidelines

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SEC faces lawsuit challenging its crypto airdrop rules, seeking clearer industry guidelines

The US Securities and Exchange Commission (SEC) is being sued in order to get clarification on the legal classification of bitcoin airdrops.

The action, filed by the DeFi Education Fund (DEF) and Texas-based clothing company Beba Collection, challenges the Securities and Exchange Commission’s (SEC) ambiguous regulatory position on cryptocurrencies.

Specifically, it questions the categorization of crypto airdrops as securities. The central issue in the action is to the SEC’s management of the BEBA token.

The plaintiffs are seeking legal validation that the BEBA tokens, which were given without charge for promotional reasons, do not qualify as securities.

The DEF has expressed apprehensions over the SEC’s stringent enforcement tactics, claiming that they pose a significant risk to the survival of the cryptocurrency industry.

Beba Collection is seeking a court declaration stating that the BEBA token does not fulfill the requirements of an investment contract or securities transaction.

This is based on the argument that the distribution of the token does not involve the recipients investing money, which is a key factor in the Howey test used to determine securities.

The disagreement also emphasizes the SEC’s commitment to comply with the Administrative Procedure Act (APA), which requires new rules to be prepared in a transparent manner and to include public input.

The consequences of this action might be significant, providing possible relief from the DEF’s claimed excessive use of regulatory power.

A positive decision in favor of DEF and Beba would question the existing regulatory stance of the SEC regarding cryptocurrencies and provide much-needed clarification to the industry by confirming that free airdrops are not considered securities transactions.

Today, a federal court has determined that the case filed by the US Securities and Exchange Commission (SEC) against cryptocurrency exchange Coinbase will continue.

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Ava Patel's expertise lies in creating engaging and informative content about the latest trends and opportunities in the crypto space. Her writing is known for its clarity, accuracy, and ability to convey complex concepts in a way that is accessible to both novice and advanced readers.