As the SEC continues with their efforts to clamp down on the ICO community, it now appears that not all of the companies they pursued are ready to back down. This month the popular messaging app Kik declared that they are prepared to challenge the SEC in court regarding their 2017 Kin ICO. The move could signal a change in the way the SEC categorizes ICOs and the introduction of many new precedents.
Kin ICO – Kik
The Canadian-based messaging firm first caught the attention of the SEC following the completion of their ICO in September 2017. The firm secured nearly $100 million in funding. Over 10,000 investors participated in the event which saw Kin accumulate 168,732 ETH. This amount, coupled with another $50 million raised in the private sector, made Kik's Kin ICO one of the most successful to date.
Now the SEC says that Kik violated their securities laws. This is an interesting stance as the ICO utilized an ERC-20 token during the launch. The SEC previously ruled that both Bitcoin and Ethereum are not securities. Following the ICO the tokens were migrated to the company’s private network. Once on the Kin network, these tokens function as currency. It is here where much of the confusion arises.
The Kin token is used within the Kin ecosystem to reward participants for their participation in certain activities. Additionally, outside developers have the ability to integrate the Kin rewards system into their native platforms as well. This allows developers to take advantage of the powerful incentivization program inherent within the ecosystem.
The developers behind Kin seek to create the most robust and widely used cryptocurrency in the world. The platform includes the Kin marketplace. Here users can spend their hard-earned Kin on a wide variety of digital services. Today, the Kin network includes over 30 apps and 6 million global users.
Kik vs SEC
Kin developers are certain that their token is not a security. In fact, the CEO of Kik, Ted Livingston publicly stated that the SEC is incorrect in their assessment. In rebuttal to the SEC, Livingston pointed out that on page 11 of the 1934 Securities Exchange Act it clearly states that the definition of a security “shall not include currency.”
While Kik's legal team is sure they have a strong case, the SEC seems to think differently. The SEC got vocal on their desire to step into the ICO market in 2017. The SEC Chair, Jay Clayton, explained that he feels every ICO is a security. Obviously, this isn't a very popular view within the cryptocommunity, and many firms are ready to challenge this idea.
Kik to set Precedents
Kik seems to feel that they have the upper hand in the upcoming legal battle for a number of reasons. For one, Kin is a currency used within the Kin ecosystem. To date, hundreds of thousands of people have used their Kin tokens to exchange for goods and services.
Livingston pointed out that this activity clearly makes Kin a utility token and therefore, not subject to SEC regulations. Further confounding the argument is the fact that Kin developers blocked Canadian investors. Canadian investors were banned from the event because Canadian regulators deeming the ICO was a security.
Now, the situation goes to court. If Kik is successful, the ramifications would alter the course of the cryptocommunity forever. As it appears now, Kik has valid reasons to defend their hugely popular cryptocurrency from the ever-reaching hands of the SEC.