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Kik Interactive, a Canadian messaging app company is getting ready for the legal battle with the SEC by bringing the Washington D.C. regulatory giant to court over a potential enforcement action against 2017 KIN token offering.
Ted Livingston, CEO of Kik Interactive announced that the company would be launching a cryptocurrency, Kin, in September 2017 in a token distribution event (TDE) or ICO with an aim to raise $125 million. Kik raised nearly $100 million from 10,000 participants for its new Kin token to be used by Kik messenger’s 15 million users as the native digital currency of the platform. This ICO has become the main reason of the clash between the social media giant Kik and SEC.
As stated by Ted Livingston, the SEC began taking serious enforcement action over the Kin TDE right after the token sale kick-started. Livingston also told the Wall Street Journal that the Kik’s Kin token is not “an unregistered security” as believed by the SEC; in fact, Kin is native currency and a way to monetize the Kik platform to be used by its users to buy various online services offered in the platform.
In contrast to Livingston’s statement, Jay Clayton, the commissioner of the Securities and Exchange Commission (SEC) said:
“I believe every ICO I’ve seen is security.” He added: “I want to go back to separating ICOs and cryptocurrencies. ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story.”
The SEC’s enforcement division believes that Kin is an unregulated and unregistered security, and hence issued a Wells notice (notifying that an action against the entity will soon be taken) on November 16, 2018, against Kik interactive. The Kik Interactive’s official response states:
“[T]he Staff’s proposed enforcement action against Kik and the Kin Foundation will likewise fail any rigorous analysis of whether offers and sales of Kin amounted to offers or sales of a “security” within the scope of Section 5 of the ’33 Act. Kin was designed, marketed, and offered as a currency to be used as a medium of exchange within a new digital economy.”
Ted Livingston further clarified the issue, stating that ‘Kin’ does not pass the classic “Howey test” that determines whether something is a security or not. In a 39-page rebuttal on Dec. 10 to the SEC, Kik interactive told that Kin is not a digital asset to behold for investment purposes and financially profitability, but rather it is a utility token to be used to maintain and bring advancements to the platform.
If the judge determines that the ICO wasn’t a sale of security tokens, the company will be saved from hefty fines and other stringent measures. Furthermore, it will also help dozens of similar ICO projects that are struggling against the SEC’s enforcement division.