Venture capital powerhouse a16z is calling on U.S. regulators to create a legal framework that allows crypto airdrops to flourish without triggering securities violations. The firm argues that these mechanisms are essential to decentralization and community ownership.

Airdrops Under Fire

https://x.com/milesjennings/status/1910362491898728894/photo/1

Regulatory crackdown has stifled innovation and excluded Americans

Miles Jennings, head of policy at a16z crypto, has published a detailed report arguing that the current treatment of airdrops by the U.S. Securities and Exchange Commission is flawed. According to Jennings, the SEC's stance under Gary Gensler has forced many projects to geoblock U.S. users, depriving them of valuable crypto distributions.

Jennings asserts that airdrops should be treated as tools for decentralization, not as securities offerings. He claims the current regulatory landscape punishes innovation and leaves U.S. users behind in a rapidly globalizing digital economy.

What Makes an Airdrop Safe?

a16z proposes five rules to qualify for exemption

Jennings laid out a five-part framework to define when an airdrop should qualify for a regulatory safe harbor:

• The token must be a network token, not one whose value is tied to a company.
• The blockchain network must be operational before the airdrop.
• Distribution must be broad and equitable, avoiding concentration among insiders or VC firms.
• Tokens must be free or earned, such as through prior engagement with the network.
• Any insider allocations must be locked for at least a year to prevent rug pulls.

These conditions aim to ensure that airdrops are fair, non-speculative, and genuinely promote decentralization rather than being disguised fundraising mechanisms.

Why Airdrops Matter

From user onboarding to decentralization, airdrops serve multiple purposes

Airdrops are widely used to reward early users, attract attention, or launch governance tokens. They often represent the first step in building a vibrant, engaged community around a blockchain project.

a16z argues that by restricting airdrops, the U.S. is missing out on a chance to expand digital ownership and promote open networks. In contrast, many international jurisdictions have embraced a more flexible approach, leading to a geographic shift in Web3 innovation.

SEC’s Current Position

Labeling airdrops as unregistered securities has chilled the market

The SEC maintains that even free distributions can qualify as securities offerings if recipients expect profits. This interpretation has left projects wary of legal risk and pushed them to exclude U.S. residents altogether.

Jennings counters that this interpretation is overly broad and doesn’t reflect the functional reality of how decentralized ecosystems grow. His proposal is designed to create clarity and flexibility, encouraging responsible innovation.

The Path Forward

Will regulators listen as Web3 pressure mounts?

The report comes amid growing calls for crypto policy reform in the U.S. With the Senate confirming crypto-friendly Paul Atkins as the new SEC chairman, industry stakeholders hope for a shift in tone.

If Jennings’ framework is adopted, it could dramatically expand participation in the next wave of decentralized platforms, giving U.S. users a fair shot at owning part of the future internet.