Beba, a Texas-based clothing company founded by African immigrants, has joined forces with the DeFi Education Fund to protect its recent distribution of BEBA tokens from potential actions by the United States Securities and Exchange Commission (SEC). The partnership aims to obtain a declaratory judgment from the U.S. District Court for Western Texas. In the lawsuit filed on March 25, the plaintiffs also sought clarification on the extent of the SEC’s authority in light of the Administrative Procedures Act (APA).
According to the lawsuit, Beba has created a total of 100,000 BEBA tokens and has already distributed 60,880 of them through an airdrop. The tokens are designed for free trade and are expected to appreciate in value. However, the SEC may argue that the BEBA tokens are investment contracts and that the airdrop constitutes a securities transaction subject to registration requirements under the Securities Act of 1933.
Nevertheless, the plaintiffs contended that recipients of the tokens did not have to meet any requirements or engage in any actions that involved significant consideration to be eligible for the airdrop. They argued that there is no common enterprise in the airdrop and that Beba did not make any promises to enhance the value of the tokens. Therefore, they asserted that the airdrop does not meet the criteria of a contract under the Howey test.
It is worth noting that tokenholders are eligible for a discount on purchases from Beba, similar to a customer loyalty program.
In addition to defending the airdrop, the lawsuit also criticized the SEC policies under Chair Gary Gensler. The plaintiffs claimed that the SEC violated the APA by not adhering to the requirement of open, clear, and public input when establishing new rules. The lawsuit sought to have the court invalidate the alleged policy or prevent the SEC from enforcing it.
Coinbase, another prominent player in the crypto industry, made a similar argument in its lawsuit against the SEC, claiming that the SEC’s actions also violated the APA.
Despite the growing significance of blockchain, decentralized finance (DeFi), and non-fungible tokens (NFTs), there is a noticeable absence of these subjects in the curriculum of many law schools. This has raised questions about why more law schools are not offering courses on these topics.