Last month I did something I thought I would never do. As a 20-something Gen Z and proud small business owner, I sued the Securities and Exchange Commission in federal court for targeting token airdrops and business activities related to digital assets.
To understand why, you have to start in East Africa, where my brother Jonathan and I grew up. It was here that we first fell in love with Kenyan handicrafts and forged close and lasting relationships with the talented artisans who today partner with us in building iconic retail brands.
These were some of the inspirations for launching Beba, a clothing company we founded to share Kenya's beautiful handmade artistry with the world. But our small business is about more than just selling backpacks and wallets. It is based on a mission to treat artisans with dignity and respect and to pay them fairly for their time, work and talent. Needless to say, we never expected our humble beginnings to lead to a lawsuit against federal financial regulators.
But just like our passion for Kenyan arts and craftsmen, I also have a deep passion for innovation, new technology and entrepreneurship. I believe that digital assets can be tools for positive, transformative change to make the world a better place and build a more inclusive and democratized financial system. This is also from my early days in Africa, where I saw firsthand how traditional record-keeping systems fail individuals and can lead to fraud, exploitation, and abuse.
At Beba, like many other companies large and small, we are always looking for innovative ways to increase awareness of our mission and reach more customers. Incorporating digital assets into your marketing plan is just one way we're trying to do that. We recently created the $BEBA token. This provides holders with the opportunity to unlock access to exclusive products available only to token holders at a discounted price. All $BEBA tokens will be distributed for free through airdrop.
Our process is similar to how major brands like Nike, Tom's, and Sephora have leveraged their digital assets to engage with customers through new immersive experiences. But those of us who choose to participate in the nearly $3 trillion digital asset industry are living under an unnecessary shadow from the SEC, given its pattern of suing companies within the agency. And as a (very) small business, even an investigation by federal regulators can put your survival at risk.
I am committed to being an honest broker. I want to follow all applicable laws and am not opposed to regulating digital assets. But I, like every other American business owner and citizen, am entitled to clearly communicated rules and transparency about what is legally required. You have the right to know whether I and my $BEBA token airdrop are in solid legal standing. Companies don't have to operate in constant fear of being accused by the SEC of violating nondisclosure rules. My business cannot move forward without clarity. You should not refrain from doing what you believe to be perfectly legal just because the SEC has refused to provide rules of the road regarding digital assets.
At the heart of my case is a challenge to the SEC's view that our $BEBA airdrop is a securities transaction and that our token is a security. The SEC's views are reflected in its understanding of its authority and general statements regarding its application in similar situations. But in my opinion, the agency is wrong. That is why I believe that the SEC has illegally adopted the policy that nearly all digital asset transactions and digital assets are investment contracts so that the public's voice can be properly heard before the SEC regulates this industry. They are asking the court to recognize that.
I believe the U.S. digital asset economy is at a tipping point. Because of the SEC, this thriving industry is subject to sporadic crackdowns that have already driven companies overseas. And while Congress is considering several bills related to digital assets, it does not give the SEC authority to regulate digital assets. Simply put, the SEC is subverting the authority of Congress, and Congress is being sued in court to intervene.
I hope not. I wish we weren't here during this uncertain time for a technology that offers so much promise and potential. But I felt I had to stand up for myself, businesses like me, our allies, and an entire industry that desperately needs clean and fair rules of the road. That's why I'm suing the SEC.
Nathan Hennigh is a Texas-based small business owner, entrepreneur, and co-founder of handcrafted apparel brand Beba. The opinions expressed in Fortune.com commentary articles are solely those of the author and do not necessarily reflect the author's opinions or beliefs. luck.
