Crypto advocacy groups withdraw SEC airdrop lawsuit amid regulatory policy shift
The case was voluntarily withdrawn without prejudice, preserving the right of Beba and the DeFi Education Fund to reinitiate legal proceedings should circumstances change.
Apparel manufacturer Beba, headquartered in Texas, along with cryptocurrency advocacy organization DeFi Education Fund, have dismissed their 2024 legal action against the United States Securities and Exchange Commission (SEC) concerning the agency's regulatory stance on airdrops, pointing to a recent transformation in how the regulator handles cryptocurrency matters.
In March 2024, Beba initiated a complimentary token airdrop and subsequently joined forces with the DeFi Education Fund to file a pre-enforcement legal challenge against the SEC during the same year.
The legal action contended that the regulatory body had implemented its digital asset enforcement strategy without conducting a formal notice-and-comment rulemaking procedure, thereby breaching the Administrative Procedure Act.
The voluntary withdrawal, submitted to the US District Court for the Western District of Texas on Friday, references the SEC Crypto Task Force's initiatives and remarks made by Commissioner Hester Peirce across multiple addresses last year indicating that airdropped tokens do not constitute securities.
The court filing additionally highlights Peirce's May suggestion that the SEC is exploring an exemption framework specifically designed for airdrops, along with a White House executive directive from January that encourages the regulatory agency to create a "safe harbor for certain airdrops."
"Given the good work done by the SEC Crypto Task Force and recent speeches that suggest a change in the Commission's position regarding free airdrops, we decided continuing was unnecessary for the time being and we can re-file if we need to later on," the DeFi Education Fund said in an X post on Friday.
"The DEF team expects that the SEC Crypto Task Force will address airdrops soon—the foundational issue at hand in this lawsuit," it added.
Lawsuit withdrawn without prejudice, maintaining future options
The withdrawal was filed without prejudice, maintaining Beba's and the DeFi Education Fund's ability to reinstate the lawsuit at a future date if necessary.
"Should the expected guidance fail to materialize or be insufficient, Plaintiffs preserve their right to refile their claims," lawyers acting for the pair wrote in the court document.
Transformation in SEC's cryptocurrency approach
During the tenure of former SEC Chair Gary Gensler, the regulatory body faced substantial criticism from cryptocurrency industry participants for purportedly developing policy through enforcement proceedings and legal settlements instead of through formal rulemaking processes.
Following Gensler's resignation on Jan. 20 2025, cryptocurrency advocates have observed a regulatory transformation at the SEC, which includes the withdrawal of numerous prolonged enforcement actions targeting crypto companies.
In a recent case, the SEC dropped a two-year lawsuit against Nader Al-Naji, founder of the blockchain-based social media platform BitClout, for allegedly raising more than $257 million by selling the native token of the BitClout platform and spending more than $7 million on personal items.