How Does the “AirDrop” Distribution Method Relate to the Functional Network Argument?

The "AirDrop" distribution method, where tokens are freely distributed to a wide user base, can support the argument that the token is not a security. Since an AirDrop involves no "investment of money" (the first prong of Howey), the transaction itself is less likely to be considered an investment contract.

This method is often used by projects that have already launched a functional network to reward early users and further decentralize token ownership, reinforcing the argument that the token is a consumable utility rather than a security sold to raise capital.