According to the Wall Street Journal: Kik, who released the KIN token as what is best described as an ICO, is pushing back on the SEC. Kik plans to fight an expected enforcement action by the SEC already levied against other ICOs.
This is an interesting case, because up until now most entities who went up against the SEC backed down and took a deal. That deal was generally 1. repay ICO investors who took a loss and file claims, and 2. pay a fine to the SEC for operating an unregister security sale.
While there is little doubt Kik has the money to back down and pay, they seem to be intent on putting up a fight by taking the issue to court to have a judge answer the question, “are ICO tokens securities?”
This could have a big impact on the crypto industry as a whole. If Kik wins, it sets the stage for other ICOs to push back against the SEC’s looming enforcement actions. If Kik losses, it’ll set the stage the other way.
Kik has an uphill battle, and I don’t understand the legal details of every aspect of it, but Kik does have some things going for it.
Namely, 1. KIN was marketed as a utility token and not an investment, 2. it proved its utility in some respects by already launching 30+ apps that deal only in KIN, and 3. it was wasn’t added to any exchanges by the Kik team as far as I understand (it was added to some exchanges, but not by the Kik team themselves).
Further, KIN is in a decent position in terms of this:
You could only buy KIN with ETH, and while KIN is down about 30%-ish in ETH, for early investors to take losses they would have had to pass up all higher prices and sell at some pretty select times.
When you consider the actual basket of investors that leaves with losses, we are talking about a small portion of total KIN holders.
Now the SEC could argue that none of that matters. They could say, you don’t get to decide if it is utility token… you don’t get to assess damages in ETH, only USD value at the time of the transaction matters… etc.
However, Kik has the capital and a logical case to make, so if they do follow through and take this to court, it’ll be an important case for the crypto community to watch.