That's correct. You need to stake on-chain to be eligible for airdrops. Sorry to hear that yours was parked on an exchange, but at least you've made the adjustment for the future. You can best manage your ATOM staking in KEPLR wallet and choose a validator there.
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Thank you for this information Matt! I will definitely get my ATOM staking on-chain but I will keep it in my other wallet where I have it parked right now. There I can choose my validators aswell!