Billions Lost: U.S. Crypto Users Sidelined By Airdrop Geoblocking

A new report by Dragonfly revealed U.S. users were excluded from billions in crypto airdrops due to regulatory geoblocking, leading to significant financial and tax revenue losses.

Geoblocking Causes Billions of Loss

U.S.-based cryptocurrency users have potentially missed out on billions of dollars in token rewards due to geoblocking restrictions, according to a new report by crypto venture capital firm Dragonfly. The study, part of Dragonfly’s “State of Airdrops 2025” publication, analyzed a set of Ethereum-based token distributions from 2020 to 2024 and highlights the financial and regulatory consequences of excluding U.S. residents from airdrops.

Between $1.84 billion and $2.64 billion worth of airdropped tokens may have gone unclaimed by American users due to location-based restrictions. Of the 12 major airdrops examined in the report, 11 implemented geoblocking mechanisms, effectively disqualifying U.S. users from participating.

Ethereum Projects Dominated by Restrictions

The airdrops covered in the report include high-profile distributions such as ApeCoin (APE), Arbitrum (ARB), EigenLayer (EIGEN), and Ethereum Name Service (ENS). Despite representing a relatively small sample of the broader airdrop ecosystem, the analysis found significant lost value among U.S. users alone.

Additional analysis from CoinGecko, which examined a larger dataset of 21 blocked airdrops, raised the upper estimate of missed payouts to $5.02 billion. While some users may have circumvented restrictions using VPNs, a substantial portion of eligible recipients likely missed out entirely.

Economic and Tax Implications

Dragonfly’s report goes beyond individual losses, underlining the broader economic repercussions of airdrop geoblocking. The report claims,

“The economic repercussions of geoblocking on U.S. users are profound, with significant revenue losses that affect both the individual claimers and the broader economic landscape.”

The firm estimates that federal tax authorities may have lost between $418 million and $1.1 billion in potential tax revenue due to these exclusions. State governments are also estimated to have forfeited up to $284 million. These figures do not account for additional tax liabilities from subsequent capital gains on the distributed tokens.

Call for Regulatory Reforms

The report urges regulators to adopt a more collaborative approach with the crypto industry to mitigate such losses in the future. Recommendations include treating airdrops similarly to credit card reward points for tax purposes, offering safe harbor provisions for past airdrops and protocols, and encouraging ongoing dialogue between policymakers and industry stakeholders.

Dragonfly noted,

“To unlock the full potential of airdrops while safeguarding user and market integrity, we call for regulatory clarity and tailored frameworks. By embracing such regulatory modernization, the U.S. can cultivate a thriving blockchain ecosystem that drives technological advancement, economic growth, and global competitiveness.”

Although there have been some indications of regulatory softening in recent months, the outlook for clear guidance around token airdrops remains uncertain.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.