Kik’s Kin ICO Legal Tussle with SEC Could Cost $10 to $20 Million to Fight, Says Crypto Lawyer
The relationship between the crypto community and various regulatory bodies has always been a rather complicated one as certain measures put in place by these bodies are seen as restrictive by the community and certain actions taken by the community are seen as out of line by these regulatory bodies. This was particularly prominent during the time when ICOs were all the range and the Securities and Exchange Commission was forced to shut down several of them for failing to register or not following the protocol.
Even though it is not as popular as it used to be, the issues between the SEC and the crypto community continue to endure and the latest of these is a conflict between the commission and Kik, a popular messaging platform. The conflict stems from Kin, Kik’s native token which was launched last year after an ICO raised by $100 million for it. After the token was released, the commission deemed it an unregistered securities token but Kik pushed back. According to Kik, Kin is a utility token and not a security token and they responded to these allegations by suing the SEC. However, the SEC has fought back by counter-suing them for the release of unregistered security token in a lawsuit that could help finally define what tokens within the crypto Community count as securities and what tokens do not.
Gearing Up For a Fight
Since the announcement of Kik’s lawsuit with the SEC, they have crowdfunded over $5 million to cover the legal costs of taking on the lawsuit and while it was a great show of the community that behind the messaging platform, it will apparently not be enough. This new information courtesy of Stephen Palley, a well-known lawyer in the crypto space. According to him, this case is a very significant one as it marks the first time ever that the SEC has had this sort of issue with a private company.
“This is the first instance of the SEC actually going to a Federal Court and suing a token issuer for violating the registration provisions of the Securities Act of 1933,”
So far, all the cases in which a firm has failed to register security has been filed and settled within the administrative court and it has never gotten to federal court. Now he also stated that the SEC chose to focus on the failure to register security as the basis of their case was a wise move on their part but that did not make the case unwinnable.
Also, while Kik has been raising up lots of funds through their website for the case, Palley says that the amount raised thus far will not be enough to adequately fight the case.
“I don’t think that $5 million is enough… Defense lawyers for this sort of case can cause $1000 an hour sometimes more, depends on depositions, whether it goes to trial, how the appeal cost… it can easily cost $10 to $20 million. I don’t think $5 million will be enough if they intend to take this all the way through,”
This is not necessarily surprising as taking a governmental body on the level of the SEC to court for a landmark case was not going to be a cheaper affair. However, it does help bring to light the struggles of the community in getting regulatory approval across-the-board and hopefully will open up a new dialogue about crypto regulations.