The crypto space continues to struggle with reaching mainstream adoption, receiving proper regulations, and encouraging institutional investors to start joining in greater numbers. While there are still quite a few reasons for this, one particular situation stands out and might end up being more damaging for the sector than many have previously believed.
The Battle Continues: Kik and Kin Refuse to Stand Down
The issue in question in the US SEC's lawsuit against Kik, Canadian messaging startup. The startup decided to create its own cryptocurrency a few years ago, known as Kin. Kin saw its token sale in 2017, during the crypto bull run, when ICOs were popping up left and right. Its ICO was rather successful, raising over $100 million. However, the problem lies in the fact that the US regulator, the SEC, believes that Kin is security.
However, it was not registered with the SEC, nor is it compliant with security regulations, hence the lawsuit. Now, the regulator demands that Kik give all of the raised money back, and with interest, at that. Meanwhile, Kik's CEO and founder, Ted Livingston, refuses to cooperate, believing that he and his company still have a stronger case.
Winning against the SEC would cast a shade on all of the regulator's previous statements regarding ICOs, tokens being securities, and alike. Everything would need to be reexamined, and many believe that the crypto space would have won an important battle. But, as things are now, that is very unlikely to happen. In fact, it is more likely that the SEC is going to win the case, which would mean the end for Kin, Kik, as well as numerous other projects that are struggling against the SEC in a similar fashion.
Indeed, Kik and Kin are already experiencing difficulties due to the lawsuit, as Ted Livingston himself admitted during a recent AMA session on Reddit. He stated that the company cannot find new partners and that it even came close to entering a major partnership with an undisclosed company. However, when the company realized that Kik is facing a lawsuit from the SEC, they changed their mind regarding the partnership.
Such partnerships would help Kik with its case in proving that Kin is a part of a decentralized network, but it cannot get it due to the lawsuit, which it cannot defeat without the partnership, and the circle continues. Of course, Kik and Kin still have supporters, but not enough to win against the SEC. Further, Kin is supposedly only meant to be used within the app, but it is also attempting to get listed on different exchanges, which makes no sense.
ICO Law Experts Claims that Kik doesn’t Stand a Chance
Many have urged Kik's founder to give up on fighting the SEC, especially Josh Lawler — a partner at ICO law specialists Zuber Lawler. Lawler recently published a post on his Medium account, stating that Kik does not have a strong enough case and that the continuation of the struggle can only cause further harm to the crypto sector.
Furthermore, he points out that the way Kin was marketed clearly points at it being security. Back in 2017, Livingston himself appeared on a video at a San Francisco-based Bitcoin Meetup, promising that those who invest into Kin will make a lot of money. The company's marketing material also promised that Kin would appear in exchanges, only to start claiming that it was never intended to be used outside of its app, as mentioned.
Lawler recognizes that the crypto sector needs more lenient regulations when it comes to ICOs, crypto startups, and cryptocurrencies themselves. However, he claims that based on the case's history, and the history of the crypto sector — the court will rule against Kik. Not only that, but it will also damage other projects by tightening the Howey Test noose around their necks.
These projects might even comply with the securities laws, but it would hardly matter if the regulations become harsher in order to avoid dealing with another project like Kik. Lawler ended his post with a direct message to Livingston, pleading that he stands down.