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Canada's messaging applications company Kik Interactive Inc. plans to sue the SEC in a court of law over possible action in execution against Kik's first 2017 coin offering (ICO) of cryptocurrency exclusive of Waterloo-based technology company, Ontario, Kin.
A Kik representative told CCN that the stakes are high for the entire cryptocurrency industry:
We do not know how the Commission will vote, but we believe that any enforcement action against Kik, Kin and the Foundation would hurt the entire cryptocurrency industry.
Kik CEO Ted Livingston told the Wall Street Journal about the upcoming legal battle between his company and Washington's regulatory giant, and wrote it on his Medium blog.
Highlights of Kik's statement, CEO of Kik
This comes after SEC chairman Jay Clayton said, "I think every ICO I've seen is a security." This includes almost all cryptocurrencies, from Ethereum.
This is the problem that everyone in the industry deals with, but nobody wants to talk about it. In order for us all to continue to recruit, innovate and stay competitive, we need to change that.
This situation is not unique to Kik. There are dozens of projects at a similar point with the SEC. We all think that this industry needs regulation, but we also think that it is not the right way to get it.
Livingston: Not all cryptographic tokens are values
On page 11 of the Securities Exchange Act of 1934, the very act that created the SEC, it is explicitly stated that the definition of a title "does not include currency".
Today, you can earn and spend Kin in more than 30 live applications in Google Play and iOS app stores. Already, hundreds of thousands of people exchanged Kin for goods and services. Kin is a cryptocurrency that is really a currency.
Livingston is right about the Securities Exchange Act of 1934 (although lawyers differ in its interpretation):
The term "security" refers to any note, share, own stock, future security, swap based on a security, bond, debenture, interest certificate or participation in any profit sharing agreement … but does not understand the currency nor any title, deals. , bill of exchange or bank acceptance with a maturity at the time of issue.
Kin has been designed, marketed, proposed and used as a cryptographic system.Motto
In Kik Interactive's official response to the SEC, Kick says:
[T]Staff enforcement actions against Kik and the Kin Foundation will also fail as part of a rigorous badysis to determine whether Kin's offers and sales constitute offers or the sale of a "Title" within the meaning of Section 5 of Law 33. Kin was designed, marketed and offered as a currency that could be used as a medium of exchange in a new digital economy.
This takes it out of the statutory definition of "security" in federal securities laws and gives it consumer use that does not correspond to an investment objective. In simple terms, Kik did not offer or promote Kin as a pbadive investment opportunity. This would have defeated the project, which could only succeed if Kin's buyers used it as a means of exchange (rather than simply keeping it as a pbadive investment).
Kik Interactive told NCC in a statement:
Our official response in Wells reinforces our position that the Commission can not and can not demonstrate that Kin is a security. We believed and still believe that we adhere to the application of federal securities laws to public token sales, even with the limited guidance provided by the Commission.
Ted Livingston Image from TechCrunch / Flickr
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