The tokens are distributed for free and unasked for, so they’re not securities, according to the suit.
Beba, a Texas clothing company run by African immigrants, and the DeFi Education Fund have teamed up to defend the company’s recent airdrop of BEBA tokens against potential actions by the United States Securities and Exchange Commission (SEC) by seeking a declaratory judgment from the U.S. District Court for Western Texas. In a suit filed on March 25, the plaintiffs also asked the court for clarification of the limits of the SEC’s authority in light of the Administrative Procedures Act (APA).
Beba created 100,000 BEBA tokens and has airdropped 60,880 of them so far, according to the suit. The tokens are intended to be freely traded and are expected to increase in value. The SEC “will take the position that BEBA tokens are investment contracts and that the airdrop is a securities transaction subject to registration requirements under the Securities Act of 1933,” it continued.
Nonetheless, the plaintiffs argued that token recipients do nothing to become eligible for the airdrop or take actions that involve no “meaningful consideration, like ‘following’ Beba on social media.” Therefore, there is no common enterprise in the airdrop. Nor did Beba promise to take measures to increase the token’s value. Therefore, the airdrop does not represent a contract under the Howey test, they argued.
