Kik, the Canadian social media startup, is planning to fight the U.S. Securities and Exchange Commission (SEC) over a recent ruling on its ICO.
According to The Wall Street Journal, Kik’s CEO Ted Livingston “plans to fight an expected enforcement action from the Securities and Exchange Commission over a 2017 initial coin online offering.”
The dispute between the two parties is over the SEC’s recent decision that Kik “issued an unregistered security when it sold $100 million in ‘kin,’ a digital token that Kik says works like a currency on [the] platform.”
Livingston contends that the kin token only functions as a currency and as such should not be held to the standards of securities regulations.
At the heart of this issue is one that many projects that ICO’d in 2017 now face.
“The SEC has said most tokens issued in ICOs, public offerings of bitcoin-like digital tokens that exploded in popularity in 2017, fall into that category [as securities],” per The Journal.
And, as securities, these tokens face certain scrutinities that they would not if classified differently by the SEC.
“A court battle with Kik could help determine the scope of the SEC’s authority to tame the unruly ICO market,” the Journal reported.
The SEC’s decision to label tokens as securities gives it the chance to more closely regulate a space that is certainly rife with fraudulent behavior. But, from Kik’s perspective, the SEC hasn’t been clear enough about the rules to give it a chance to comply properly.
“The SEC isn’t accusing Kik of fraud,” Livingston told the Journal. “Rather, its enforcement division believes Kik failed to register the sale with the SEC and thus didn’t give investors the proper information. That can’t happen until the SEC’s commissioners vote on the matter, and it is unclear if they’ve done so.”
The kin token has been steadily depreciating in value, originally devised “as a way to monetize the Kik platform. Developers and Kik users could earn kin for building apps and completing tasks like answering surveys.”
Ten trillion kin tokens were released initially and 1 trillion were sold publicly, while 6 trillion went to a nonprofit foundation and 3 trillion were kept by Kik. The result of the project’s case with the SEC could have significant effect on the value and status of these tokens.
Based on the Journal report, it appears that Kik plans to argue that kin was never marketed as a security, but rather as a utility token for developers and as a catalyst for the creation of apps and services on Kik.