Beba, a Texas clothing company run by African immigrants, and the DeFi Education Fund have teamed up to defend the company’s recent airdrop of BEBA tokens against potential actions by the United States Securities and Exchange Commission (SEC) by seeking a declaratory judgment from the U.S. District Court for Western Texas. In a suit filed on March 25, the plaintiffs also asked the court for clarification of the limits of the SEC’s authority in light of the Administrative Procedures Act (APA).

Beba created 100,000 BEBA tokens and has airdropped 60,880 of them so far, according to the suit. The tokens are intended to be freely traded and are expected to increase in value. The SEC “will take the position that BEBA tokens are investment contracts and that the airdrop is a securities transaction subject to registration requirements under the Securities Act of 1933,” it continued.

Nonetheless, the plaintiffs argued that token recipients do nothing to become eligible for the airdrop or take actions that involve no “meaningful consideration, like ‘following’ Beba on social media.” Therefore, there is no common enterprise in the airdrop. Nor did Beba promise to take measures to increase the token’s value. Therefore, the airdrop does not represent a contract under the Howey test, they argued.

Tokenholders are eligible for a discount on an item sold by Beba, however. It compared that offer to a customer loyalty program.

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In addition to defending the airdrop, the suit took issue with SEC policies under chairman Gary Gensler. The SEC violates the APA, it claimed, because the act “tells agencies that when they make new rules, they must do so openly, clearly, and with the benefit of public input.” The suit sought:

“A declaration that Defendant [the SEC] violated the APA, both procedurally and substantively, when it adopted a new unwritten policy that nearly all digital assets are securities and the majority of transactions involving digital assets are securities transactions.”

It also demanded that the court vacate the purported policy or preventing the SEC from enforcing it.

Coinbase also argued that the SEC is violating the APA in its suit demanding a rulemaking from the SEC.

Beba had previously released nonfungible tokens (NFTs)

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