Kik is Standing Firm in Refusing to Settle with the SEC Regarding the Legality of their KIN Token ICO
The debate as to whether or not digital coins are to officially be classified as securities is still on and Kik, a popular interactive social media app backed by Tencent, is still embroiled in very costly negotiations with the United States Securities and Exchange Commission (SEC) over the legality of its Kin Tokens.
Kik successfully sold about $100 million worth of its tokens during its Initial Coin Offering (ICO) in September of 2017. A while before this, a controversial guideline was issued by the SEC which had it that ICOs could be deemed as illegal securities offerings. This was then followed by the SEC’s decision to send subpoenas to quite a few crypto firms, including Kik.
However, in December 2018, the SEC went ahead to notify Kik of the possibility of initiating an enforcement action against the firm, for going against U.S. securities laws.
In December last year, Kik submitted its response to the SEC’s Wells notice, clarifying a few things including the fact that the tokens were in the first place, strictly created for incorporation with the app. The response also includes measures taken by Kik to satisfy compliance requirements. Some of those include paying complete taxes on the revenue gotten from the ICO, KYC/AML, and OFAC screening,
Kik might also have expressed disappointment as to why the firm is under the SEC’s radar because:
“When Kik began contemplating the sale of a new cryptocurrency in early 2017, cryptocurrencies (such as Bitcoin and Ether) had existed for nearly 10 years, and yet no court, government agency, or factfinder had deemed any sale of cryptocurrency to be a sale of securities.”
This argument, according to Kik, means that there is no currently available law that classifies currencies as securities.
Furthermore, the response indicated that since
“Kik took substantial measures to comply with the federal securities laws based on existing guidance”,
the commission should
“nonetheless use its discretion and decline to bring an enforcement action” even if the commission disagrees with the firm’s position on the central legal issue. The firm notes that any additional legal actions brought against Kik will “not only harm Kin purchasers, who the Commission purports to protect, but it will carry the ill effects of regulating through enforcement.”
The usual and most expected response with cases like this is for the party in question to focus on trying to settle with the SEC. Many affected parties do this to evade significant cost that will be incurred in the event that the case is lost. However, in the firm’s Wells Response, it noted specifically that it will not be settling.
This means that the SEC could either decide not to pursue the case or eventually decide that Kik’s arguments are not compelling enough causing the commission to go ahead with bringing an enforcement action.
Ted Livingstone, the CEO of Kik, has already complained about how much the entire process has cost the firm. According to him,
“We’ve spent a lot of money on this, over $5 million. We’ve spent a lot of time on this. We’ve spent the last 18 months traveling to Washington.”