Beba and DeFi Education Fund Seek Legal Shield for Token Airdrop Against SEC Scrutiny
Summary:
Texas-based clothing firm Beba and the DeFi Education Fund have sought legal clarification to defend the company’s recent BEBA token airdrop against potential intervention by the U.S. Securities and Exchange Commission (SEC). They have asked for a declaratory judgment from a U.S. court to illuminate the SEC's jurisdiction boundaries, arguing that the airdropped tokens, of which 60,880 have been distributed so far, fail the Howey Test for being a contract and are instead akin to a customer loyalty program. They also criticize the SEC's alleged violation of the Administrative Procedures Act (APA), which they argue demands transparent, inclusive rulemaking. Beba has previously issued nonfungible tokens (NFTs).
Beba, an apparel manufacturer from Texas managed by African migrants, and the DeFi Education Fund are joining forces to safeguard the recent BEBA token airdrop from potential United States Securities and Exchange Commission (SEC) interventions by requesting a declaratory judgment from the U.S. District Court in Western Texas. Their lawsuit, submitted on March 25, additionally calls for a delineation of the SEC's jurisdiction in accordance with the Administrative Procedures Act (APA). According to the filing, Beba has produced 100,000 BEBA tokens, with 60,880 of those already distributed via airdrop. The expectation is for these tokens to be openly traded and gain in value. The SEC may argue that BEBA tokens are investment contracts, thus making the airdrop a securities transaction necessitating registry under the 1933 Securities Act, the lawsuit suggests. However, the plaintiffs counter that claiming the airdrop does not involve any notable contributions, such as following Beba on social media, making the airdrop devoid of a mutual establishment. Beba also did not commit to efforts to enhance the token's worth, implying that it fails the Howey test for being a contract, they contend.Source: DeFi Education FundBeba does, nevertheless, offer token holders a markdown on a purchase. This offer is likened to a client loyalty scheme. Related: DeFi consortium petitions against 'patent troll' zeroing in on DeFi protocolsThe lawsuit further criticizes the SEC's approach under the current leadership of Gary Gensler, alleging that it infringes the APA. The litigants argue that the APA demands transparent, comprehensible rulemaking that involves public feedback, which the SEC contradicts. The lawsuit is demanding an assertion stating that the SEC's unwritten policy that nearly all digital assets and the majority of transactions involving them are securities violates the APA, both in form and content. The complainants are also calling on the court to overturn this alleged policy or to prohibit the SEC from implementing it. Coinbase is echoing the claim of SEC's APA violation in its own lawsuit seeking a regulatory ruling. Beba has previously issued nonfungible tokens (NFTs). Magazine: Powers On… How come more legal schools aren't offering courses on blockchain, DeFi, and NFTs?
Published At
3/25/2024 11:30:00 PM
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