Original author: TechFlow
It’s 2025. Have you ever made a fortune from airdrops?
If you don’t have one, don’t feel sad, because some people are not even eligible to participate in the airdrop - such as American friends across the ocean.
A fact that is hard to believe is that the professional airdrop industry has flourished in the Chinese circle, but due to policy and regulatory restrictions in the United States, most crypto projects will consider avoiding suspicion when formulating airdrop policies and exclude users in the United States.
Today, with the formulation of various pro-crypto policies by the US government, various crypto-related actions by the president, and more US companies starting to hoard Bitcoin, the United States voice in the crypto market has never been as great as it is today.
Changes in US policies are also affecting the landscape of the airdrop market and providing a reference for innovation in other countries.
Against this backdrop, the renowned VC Dragonfly released the “Airdrop Status Report 2025,” attempting to quantify the impact of U.S. policies on airdrops and the crypto economy through data and analysis.
TechFlow has distilled and interpreted the core ideas of the report, which are summarized as follows.
Key conclusion: US users and government did not benefit from the airdrop
US users are restricted due to geo-blocking:
Number of users affected: In 2024, approximately 920,000 to 5.2 million active US users (5%-10% of US cryptocurrency holders) will be unable to participate in airdrops or use certain projects due to geo-blocking policies.
The proportion of US users in global crypto addresses: In 2024, 22%-24% of the worlds active crypto addresses will belong to US users.
Economic value of airdrops:
Total airdrop value: Among the 11 sample projects, the total airdrop value was approximately US$7.16 billion, with approximately 1.9 million users participating worldwide, and the average median amount received by each address was approximately US$4,600.
Revenue loss for US users:
Across 11 geo-blocked airdrops, revenue losses for U.S. users are estimated at $1.84 billion to $2.64 billion (2020-2024).
According to 21 geo-blocked airdrop projects analyzed by Coingecko, potential revenue losses for U.S. users could be as high as $3.49 billion to $5.02 billion (2020-2024).
Tax losses:
Personal tax losses:
Federal tax loss: Approximately $418 million to $1.1 billion (2020-2024).
Lost state tax revenue: About $107 million to $284 million.
Overall tax loss: Approximately $525 million to $1.38 billion, not including capital gains tax revenue from token sales.
Corporate tax losses:
Due to the relocation of crypto companies, the United States has missed a lot of corporate tax revenue. For example, Tether (the issuer of USDT) had a profit of $6.2 billion in 2024. If it were fully subject to US tax supervision, it could have contributed about $1.3 billion in federal taxes and $316 million in state taxes.
The impact of crypto companies relocating:
Cryptocurrency companies choose to register and operate overseas due to regulatory pressure, further exacerbating the US tax losses.
Tether is just one example of the broad negative impact that overall industry relocation is having on the U.S. economy.
Why are airdrops restricted in the United States?
The U.S. regulatory environment restricts the airdrop market due to regulatory uncertainty and high compliance costs. Here are the key reasons:
1. Ambiguous regulatory framework
US regulators (such as the SEC and CFTC) tend to establish rules through enforcement actions rather than developing a clear legal framework. This enforcement first model makes it difficult for crypto projects to predict which actions are legal, especially for emerging models such as airdrops.
2. Airdrops may be considered securities
According to the US Securities Act, the SEC uses the Howey test to determine whether an asset is a security. The core of the Howey test is:
Whether it involves capital investment: that is, whether the user has paid money or other resources to obtain the asset;
Expecting returns: whether the user expects to profit from the appreciation of assets or the efforts of the project party;
Dependence on the efforts of others: whether the proceeds are derived primarily from the work of the issuer or a third party;
Is it a joint venture: whether the profits and risks are shared among investors.
Many airdropped tokens meet these conditions (such as users expecting tokens to appreciate in value), and are therefore deemed securities by the SEC. This means that project owners need to comply with cumbersome registration requirements, or they may face high fines or even criminal liability. In order to avoid these risks, many projects choose to directly block US users.
3. Complexity of tax policies
Current tax laws require users to pay income tax based on the market value of tokens when they receive airdrops, even if the tokens have not been sold. This unreasonable tax burden, coupled with subsequent capital gains taxes, further reduces the willingness of US users to participate in airdrops.
4. Geo-blocking is becoming more common
In order to avoid being identified as providing unregistered securities to U.S. users, many projects choose to geo-block U.S. users. This strategy not only protects the project parties, but also reflects the suppression of innovation by the U.S. regulatory environment.
At the same time, the report also clearly lists the changes in the attitude of US crypto regulatory laws towards crypto airdrops and the events in which airdrops of key projects were excluded from the United States in a very detailed and chronological order.
How do encryption projects block American users?
These measures are designed to protect compliance and to avoid penalties for unintentional violations. The following are common blocking methods:
1. Geoblocking
Geo-blocking restricts users in a specific region from accessing services or content by setting up virtual borders. Projects usually use the users IP address, DNS service country, payment information location, and even language settings when shopping online to determine the users region. If the user is identified as being from the United States, access will be blocked.
2. IP Blocking
IP blocking is one of the core technologies of geo-blocking. Every internet device has a unique IP address, and when a user tries to access the platform, the system blocks the IP address marked as US through the firewall.
3. VPN Blocking
A virtual private network (VPN) can hide a users real IP address to protect privacy, but the project will also monitor the traffic of VPN servers. If an IP address is found to have abnormally high traffic or diverse activities, the platform may block these IP addresses to prevent US users from bypassing restrictions through VPN.
4. KYC (Know Your Customer) Verification
Many platforms require users to complete the KYC process and submit identity information to confirm their non-US identity. Some projects even require users to declare their non-US identity by signing their wallet. This method is not only used to prevent illegal financing and money laundering, but also becomes an important means to block US users.
5. Clear legal notice
Some projects clearly state in their airdrops or terms of service that U.S. users are not allowed to participate. This good faith effort is intended to show that the project has taken measures to restrict U.S. users, thereby reducing legal liability.
Despite the projects efforts to block U.S. users, U.S. regulators (such as the SEC and CFTC) have not provided clear compliance guidance, resulting in the projects lack of clear understanding of sufficient blocking measures.
Blocking measures also bring increased operational costs and compliance risks. For example, relying on third-party geo-blocking services (such as Vercel) may lead to the risk of violations due to data errors, and the responsibility is ultimately borne by the project party.
What is the economic impact of the US absence from crypto airdrops?
How much economic damage have been caused by the restrictions of US policies?
To quantify the impact of geo-blocking policies on cryptocurrency airdrops for U.S. residents and assess the broader economic consequences of these policies, the report analysis estimates the number of U.S. cryptocurrency holders, assesses their participation in airdrops, and defines the potential economic and tax losses due to geo-blocking.
In terms of specific operations, the report selected 11 geo-blocked airdrop projects and 1 non-geo-blocked airdrop as a comparison, and conducted in-depth data analysis in terms of number of people and economic value.
1. Crypto participation rate among US users
Of the estimated 18.4 million to 52.3 million cryptocurrency holders in the United States, there are approximately 920,000 to 5.2 million monthly active U.S. users in 2024 who are subject to geo-restriction policies, including airdrops and more limited participation in project usage.
(Original image from the report, compiled by TechFlow)
By 2024, an estimated 22% to 24% of active crypto addresses worldwide belong to U.S. residents.
The total value generated by our sample of 11 projects was approximately US$7.16 billion, of which approximately 1.9 million people worldwide participated in the airdrop, with the median value received per eligible address being approximately US$4,600.
The following table breaks down the amounts by project name.
(Original image from the report, compiled by TechFlow)
2. Losses of US users who did not participate in the airdrop
(Original image from the report, compiled by TechFlow)
Based on the airdrop data in the table above, it is estimated that U.S. residents missed out on between $1.84 billion and $2.64 billion in potential revenue for the sample group between 2020 and 2024.
3. Tax losses
The estimated tax revenue losses from 2020 to 2024 due to airdrop restrictions range from $1.9 billion (the lower end of the estimate in the reported sample) to $5.02 billion (the upper end of the estimate in other Coingecko research).
The corresponding federal tax revenue loss calculated using individual tax rates is expected to be between $418 million and $1.1 billion, and the state tax revenue loss is also estimated to be between $107 million and $284 million. In total, the total tax revenue loss in the United States in these years is between $525 million and $1.38 billion.
Offshore losses: In 2024, Tether reported $6.2 billion in profits, surpassing traditional financial giants such as BlackRock. If Tether were headquartered in the United States and subject to full U.S. taxes, this profit would be subject to a 21% federal corporate tax, an estimated $1.3 billion in federal taxes. In addition, given the average state corporate tax rate of 5.1%, an estimated $316 million in state taxes would be incurred. In total, the potential tax losses due to Tethers offshore status alone could be around $1.6 billion per year.
4. Crypto companies leaving the US
Some companies have already exited the US completely, for example:
Bittrex: It shut down its U.S. operations, citing the decision as due to “regulatory uncertainty” and an increased frequency of enforcement actions, particularly from the SEC, which made it “unfeasible” to do business in the U.S.
Nexo: Phased out US products and services after 18 months of unproductive dialogue with US regulators.
Revolut: The UK-based fintech company has suspended cryptocurrency services for U.S. customers, citing a changing regulatory environment and continued uncertainty in the U.S. crypto market.
Other companies are preparing for the worst-case scenario (i.e., no regulatory clarity and continued enforcement) and are beginning to set up operations overseas or turn to non-U.S. consumers. These companies include:
Coinbase: The largest U.S. crypto exchange has opened operations in Bermuda to take advantage of a more favorable regulatory environment.
Ripple Labs: Waged in a long, multi-year legal battle with the SEC. 85% of job openings are for overseas personnel as of September 2023, with U.S. staff falling from 60% to 50% by the end of 2023.
Beaxy: In March 2023, after the U.S. Securities and Exchange Commission sued the company and its founder Artak Hamazaspyan for operating an unregistered exchange and brokerage business, the exchange issued an announcement saying that it had decided to suspend operations due to the uncertain regulatory environment surrounding it.
Some solid advice
Establish a “Safe Harbor” mechanism for non-financial cryptocurrency airdrops:
Issuers are required to provide detailed information on token economics (such as supply, distribution method), governance mechanism, potential risks, and any usage restrictions.
Insiders are subject to a lock-up period of at least three months to prevent insider trading or front-running.
Tokens can only be distributed through non-monetary contributions (such as services, participation in network activities, or prior holdings); direct monetary transactions will disqualify them from the safe harbor.
Expand the scope of application of Rule 701 of the U.S. Securities Act to participants in technology platforms, particularly crypto tokens distributed through airdrops or compensation for services.
Align the tax treatment of cryptocurrency airdrops with the tax rules for credit card rewards or promotional gift cards to ensure fairness and reasonableness.
Airdrop tokens should not be considered taxable income when received.
Taxes should be levied when tokens are sold or exchanged for other assets, because that is when the tokens become liquid and have a quantifiable market value.
Taking advantage of the political transition periods brought about by election cycles provides unique opportunities for regulatory innovation.
The SEC should develop clear rules to clarify when digital assets are considered securities; abandon the strategies of regulation through enforcement and regulation through intimidation and turn to formal rulemaking. Provide clear compliance guidance to help crypto startups innovate with peace of mind.
