Beba and Defi Education Fund Sue the SEC Over Its Airdrop Policies

Texas apparel company Beba and the Defi Education Fund (DEF) have announced a legal complaint against the U.S. SEC. They allege that the SEC has violated Administrative Procedure Act procedures by adopting an encompassing crypto policy without an official rulemaking process. Additionally, the plaintiffs seek to clarify that a token airdropped to its users does not constitute a security transaction.

Beba and Defi Education Fund Fight the SEC on Airdrops and Crypto Securities Policy

Due to its cryptocurrency policies, the U.S. Securities and Exchange Commission (SEC) is again facing legal action. Beba, a Texas-based apparel company with African connections, and the Defi Education Fund (DEF), a non-profit organization, introduced a complaint in the Western District of Texas regarding the commission’s actions and policies on airdrops, a common token distribution method.

The lawsuit focuses on two main points. First, the plaintiffs argue that the airdrop of BEBA, a token freely distributed by the Texas company to users, does not classify as a security transaction. Beba and DEF allege that these transactions cannot be considered securities transactions because there is no investment of money involved, meaning that these wouldn’t pass the Howey test, a set of questions commonly used to define whether a transaction constitutes an investment contract.

The second point refers to the policy change that the commission has had regarding crypto. The plaintiffs allege that to justify its change of heart regarding crypto, the commission had to go through a process of rulemaking under the Administrative Procedure Act (APA), which “tells agencies that when they make new rules, they must do so openly, clearly, and with the benefit of public input.”

The lawsuit states that the SEC “left token creators at the mercy of actions to which they were not parties. And it left individuals unable to seek judicial review of the SEC’s policy, allowing the SEC to hide its disregard for its statutory authority.”

Beba and DEF join the ranks of other parties that have taken legal action against the SEC. In February, Lejilex and the Crypto Freedom Alliance of Texas sued the commission for its “unlawful assertion of regulatory authority” on cryptocurrency assets.

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