On March 25, 2024, DEF and Beba LLC, a Waco, Texas-based apparel company, sued the SEC, in the Western District of Texas, arguing that the agency unlawfully adopted its “nearly all tokens are securities” policy, which was never publicly defined yet wantonly enforced. The case challenges the SEC’s practice of regulating digital assets through enforcement and seeks a declaration that $BEBA token free airdrops are not securities transactions.
DEF joined Beba in asking the court to hold the SEC accountable to the APA’s rulemaking requirements and to recognize that applying securities laws to free token distributions is unlawful and chilling to innovation.
Status: Ongoing
Brief Overview of Beba LLC and DeFi Education Fund v. SEC
In March 2024, Beba LLC, a Texas-based apparel company, and DEF filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) asking for a declaratory judgment that a free airdrop of $BEBA tokens is not a securities transaction and the BEBA tokens themselves are not investment contracts, and alleging the SEC adopted its digital asset enforcement policy in violation of the Administrative Procedure Act.
In an effort to leverage digital assets for marketing its business, Beba created $BEBA tokens providing holders with the opportunity to unlock access to exclusive products. The $BEBA tokens were distributed via airdrop for free; token recipients did nothing to become eligible for the airdrop.
Background Timeline of Related Events
DEF and Beba, sue the SEC in the U.S. District Court for the Western District of Texas seeking a court order declaring that free token airdrops are not securities transactions and that the SEC unlawfully adopted a strategy of targeting the digital asset industry pursuant to an unwritten rule that most digital assets are securities.
DEF and Beba file an opposition to the SEC’s motion to dismiss the amended complaint.
The Blockchain Association and Crypto Council for Innovation file an amicus brief in Beba v. SEC.
Five VC firms, Variant Fund, a16z, Multicoin Capital, Paradigm and Union Square Ventures, file an amicus brief in opposition to the SEC’s motion to dismiss.
The Texas Blockchain Council and Investor Choice Advocates Network file an amicus brief supporting the Plaintiffs’ opposition to the SEC’s motion to dismiss.
The case remains in abeyance.