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DeFi Education Fund and Texas-based apparel company Beba have filed a lawsuit with the Securities and Exchange Commission (SEC). The complaint, filed in the U.S. District Court for the Western District of Texas, calls into question the approach taken by the SEC. digital asset regulationespecially their views on the classification of certain tokens as securities.
Legal challenge over token classification
The essence of the lawsuit lies in the $BEBA tokens distributed by Beba via airdrop. According to the plaintiffs, these tokens, which can be used to purchase exclusive items on Beba’s online store, should not be considered securities. They argue that the way the tokens are distributed and used does not meet the Howie test used by the federal government. SEC To check whether an asset is an investment contract and therefore a security.
The Howey Test requires you to put money into a common venture that will produce the expected benefit from the efforts of others. Beba and the DeFi Education Fund argue that the $BEBA airdrop does not meet these conditions because the tokens are being distributed for free and there is no expectation of profit based on the performance of others.
SEC’s regulatory approach under scrutiny
The lawsuit also charges the SEC with violating the Administrative Procedures Act (APA). federal agency Rules are developed through an open process of public notice and comment. Plaintiffs allege that the SEC’s “regulation by enforcement” strategy creates uncertainty in the cryptocurrency industry and does not provide clear guidelines or public participation.
The complaint alleges that this tactic stifles innovation and burdens companies seeking to leverage their digital assets in legitimate ways.
Nathan Henney, co-founder of Beba, lamented:
“Like any business owner, I am always thinking of new and innovative ways to reach more customers and expand support for our products. We operate in a constant state of uncertainty because of the SEC’s approach to assets.”
As a result, the SEC was given 60 days to respond to the complaint’s allegations. This period is standard for this type of proceeding and allows the SEC to prepare and file a formal response.
Also read: XRP Lawsuit: Ripple CLO Blames SEC’s $2 Billion Fine Soon to Be Revealed
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