SEC Denies Kik’s Subpoenas and Dismisses its ‘Void for Vagueness’ Defense On Its $100 Million ICO
The U.S Securities Exchange Commission (SEC) is currently in a legal battle with Canadian crypto firm, Kik. Both have been to court on grounds that Kik launched a $100 million ICO which ought to have been under the SEC’s regulation as a security.
The SEC commented,
“This defense asserts that, notwithstanding 70-plus years of well-settled jurisprudence, the term ‘investment contract’ in the securities laws is void for vagueness as applied to Kik’s investment scheme. This claim is untenable and should be dismissed.”
The Canadian startup had raised the funds back in 2017 and began its crypto oriented social media platform. Today, legal battles have become an order of the day between Kik and SEC; both are however determined to fight by leveraging any avenues available in their defenses. Kik has taken the stand of void for vagueness in SEC’s regulation approach while the agency defended itself with the definition of an ‘investment contract’ as per the Howey test.
Rebecca Rettigat FisherBroyles said,
“Kik is obviously using the void for vagueness defense as a way to try to peek behind the curtain at the SEC to figure out if the SEC really had a plan all along.”
Kik’s Void for Vagueness Defense
Kik blamed the SEC for being inconsistent in regulating the cryptocurrency space especially digital assets. According to the firm’s filling, the SEC ought to not have involved itself in the regulation of certain assets given the existing issues in clarity hence a void for vagueness.
They have further argued that the SEC is a major contributor to the ongoing confusion within the blockchain and crypto sphere. Kik notes that regulators including the U.S congress and Academic institutions ousted the SEC for failing to direct crypto stakeholders clearly on the laws.
SEC’s Response to Kik’s Discovery Motion
The U.S regulator hit back after an aggressive move by Kik to file subpoenas against three of its top members including FinHub’s Chief Legal Officer. They argued that Kik’s filing on void for vagueness was untenable given the precedence set over 70 years ago in the Howey case, which clarified investment contracts as an agreement to increase investor’s wealth or make a profit that benefits from.
In addition, the Agency also argued that its DAO report guiding digital assets was released in July 2017. This was three months before Kik launched its ICO which means they ought to have done it within the guidelines and eventually be regulated as a security.
Retting stated on the matter,
“The SEC says DAO was the line: ‘We issued our DAO report and after that everyone in the digital assets space is on notice that if they were issuing tokens, they better do a Howey analysis and make sure that they weren’t investment contracts. You, Kik, didn’t do that and therefore you violated section 5 of the Securities Act.”