Key Takeaways
- The lawsuit argues that Beba’s distribution of its BEBA crypto token to customers for free does not violate U.S. securities laws.
- They criticized the SEC’s targeting of airdrops, as unregistered securities transactions.
The DeFi Education Fund (DEF) has taken legal action against the U.S. Securities and Exchange Commission (SEC) by filing a lawsuit in a Texas federal court. DEF’s lawsuit challenges the SEC’s stance on Beba, a Texas-based apparel company, arguing that Beba’s distribution of its BEBA crypto token to customers for free does not violate U.S. securities laws.
The lawsuit aims to secure a court order officially validating Beba’s airdrop as legal, which could potentially shield similar initiatives from SEC litigation. DEF also seeks clarity on the SEC’s authority under the Administrative Procedures Act (APA).
According to DEF’s court filing, Beba’s activities comply with securities laws, despite the SEC’s policy declarations to the contrary. They criticized the SEC’s targeting of airdrops, as unregistered securities transactions.
The lawsuit reveals that Beba has distributed 60,880 out of 100,000 BEBA tokens thus far, intending for them to be freely traded and increase in value. However, the SEC may argue that BEBA tokens constitute investment contracts and that the airdrop qualifies as a securities transaction subject to registration requirements under the Securities Act of 1933.
DEF argued that airdrop recipients undertake actions with no meaningful consideration, such as following Beba on social media, and therefore, there is no common enterprise in the airdrop. They also contended that Beba did not promise to enhance the token’s value, failing to meet the requirements of the Howey test.
While tokenholders receive discounts on Beba products, DEF likened this offer to a customer loyalty program rather than a securities offering. The lawsuit also accuses the SEC of violating the APA by internally establishing crypto policies without public disclosure.
It raises concerns about SEC policies under Chair Gary Gensler and seeks a declaration of the SEC’s APA violation. Additionally, it demands that the court nullify the alleged policy or prevent the SEC from enforcing it.
Although Beba has not faced a lawsuit from the SEC, it is preemptively invoking the Declaratory Judgment Act, enabling legal recourse before experiencing damages if unjustified enforcement actions are anticipated.
