U.S. SEC Airdrop Regulatory Framework Undergoes Transformation: Five Conditions Build a Safe Harbor for Crypto Assets

In early November 2025, the U.S. Securities and Exchange Commission (SEC) officially solicited public comments on updates to the cryptocurrency regulatory framework, focusing on compliance pathways for asset distribution mechanisms such as airdrops. Crypto venture capital firm Dragonfly promptly submitted policy recommendation reports proposing that airdrops meeting five conditions—network tokens, full functionality, broad distribution, limited consideration, and transfer restrictions—should be exempt from securities law regulation. This policy discussion will directly impact the decentralization process of blockchain projects; currently, 37% of domestic U.S. projects have been forced to relocate overseas due to regulatory uncertainty.

The Nature of Airdrop Mechanisms and Regulatory Challenges

As a unique asset distribution method within the blockchain ecosystem, airdrops fundamentally serve to decentralize network control by distributing tokens for free. Unlike traditional securities offerings, participants in airdrops typically do not pay consideration but are rewarded based on prior network participation or specific behaviors. This mechanism facilitated the launch of over 120 major blockchain projects in 2024, with 81% achieving initial decentralization through airdrops.

However, SEC’s previous tendency to categorize airdrops under securities law has caused a significant chilling effect. According to the Blockchain Association, participation in airdrops by U.S. users declined by 47% between 2024 and 2025, and 89 emerging projects explicitly exclude U.S. users. This regulatory uncertainty not only limits opportunities for U.S. consumers but also pushes innovative projects to more regulation-friendly regions such as Singapore and Dubai, causing the U.S. to fall behind in the blockchain innovation race.

Analysis of the Five Core Conditions in the Safe Harbor Framework

In its policy recommendations to the SEC, Dragonfly systematically proposed standards for airdrop safe harbor eligibility. The first condition, “network tokens,” requires that the token’s value primarily derives from decentralized network operations rather than management efforts by a specific entity. For example, Ethereum’s native token ETH is valued based on the coordinated operation of thousands of independent nodes worldwide, not the performance of a single entity.

The second condition, “full functionality,” emphasizes that blockchain networks must possess basic operational capabilities, including state updates, value transfer, staking mechanisms, and other core functions. Evaluation metrics should include the number of network nodes (recommended over 1,000), average daily transaction volume (over 100,000 transactions), and active smart contracts. The third condition, “broad distribution,” mandates that airdrops cover the majority of network participants, avoiding unfair advantages for insiders; ideally, the top ten holders should hold less than 20%.

The fourth condition, “limited consideration,” is key to distinguishing airdrops from securities sales. Recipients’ consideration should not exceed 5% of the token’s fair market value. The fifth condition, “transfer restrictions,” involves setting lock-up periods for project insiders, with a recommended duration of 12 months, to prevent market manipulation arising from information asymmetry.

Legal Characteristics and Policy Value of Decentralized Networks

From a legal perspective, truly decentralized blockchain networks resemble public infrastructure rather than corporate assets. Once a network reaches sufficient decentralization, its tokens no longer depend on the managerial efforts of a specific entity, which fundamentally differs from the “reliance on efforts of others” criterion in the Howey test for securities. Several U.S. court cases in 2023 have begun to recognize this distinction; for example, in the SEC v. Ripple case, the judge ruled that programmatic sales of XRP do not constitute securities contracts.

From a policy standpoint, encouraging compliant airdrops has multiple positive implications. First, it can promote the evolution of blockchain networks toward healthier decentralization; the average Gini coefficient of mainstream public chains is currently 0.72 but could be reduced below 0.45 through broad airdrop distribution. Second, widespread distribution mechanisms can stimulate network effects; data shows that projects that have undergone large-scale airdrops experience an average 230% increase in ecosystem applications within six months. Most importantly, a clear regulatory framework can help retain blockchain innovation talent in the U.S., potentially generating an estimated $12 billion annually in economic value.

Global Regulatory Trends and Market Impact Predictions

Looking at major jurisdictions worldwide, the EU’s Markets in Crypto-Assets (MiCA) regulation has established specific exemptions for utility tokens, and the Monetary Authority of Singapore (MAS) has issued dedicated airdrop guidelines. This regulatory clarity has led to an 85% year-over-year increase in blockchain project funding in Europe in 2025, while the U.S. saw only a 12% growth. If the SEC adopts a similar safe harbor framework, it is expected to attract at least 150 overseas projects to return to the U.S. market.

For investors, a safe harbor framework will significantly reduce legal risks associated with early-stage projects. Currently, airdropped tokens exhibit an average volatility of 180% within 30 days of distribution; projects meeting the five conditions could see volatility drop below 95%. Additionally, institutional investors may be more willing to allocate to compliant airdrops, potentially bringing in an incremental $3-5 billion annually into the market.

Conclusion

The SEC’s re-evaluation of airdrop regulation marks a potential pivotal point in U.S. cryptocurrency policy. Establishing a safe harbor based on the five conditions can protect investors while preserving necessary space for blockchain innovation. The success of this balanced approach will determine the U.S.'s position in the next-generation internet infrastructure race.