The firm behind Kik, a Canada-based messaging app, is going to court with the US Securities and Exchange Commission (SEC) over allegations that the platform’s native cryptocurrency Kin (KIN) is a security.
To support their case against the SEC, Kik has launched a crypto crowdfunding campaign to help them build a case against the SEC and potentially lead regulators to develop a new Howey test (the test that determines whether an asset is labeled as a security or not) for crypto tokens.
As stated by Kik founder and CEO Ted Livingston during Anthony Pompliano’s UnChained Podcast on Tuesday, he said their hope with this campaign is that:
“A lawsuit would eventually result in a new Howey test for crypto tokens, to determine which ones are a security.”
Why Is Kik’s Kin Token Being Scrutinized by the SEC?
Kik held an initial coin offering (ICO) in 2017, where they raised nearly $100 million to develop the Kin blockchain protocol and cryptocurrency ecosystem, just like countless other ICOs.
However, the SEC believes Kik promoted their ICO to investors with the promise of a significant return on their money. It’s also believed that Kik’s ICO was a last-ditch effort to raise money after their company fell dramatically behind its competitors.
Outlining a summary of Kik’s lifespan and where they are today is Tim Swanson, the founder and director of research at the US-based tech advisory firm, Post Oak Labs:
summary of @kik:
– founded in 2009 (same year as WhatsApp)
– four funding rounds up through 2015
– growth flatlined
– unable to exit or find new VCs
– raised $100m in 2017 via last ditch effort ICO called KIN
– subpoenaed by SEC
– get court of public opinion to legitimize its ICO
— Tim Swanson (@ofnumbers) May 28, 2019
Given Kik’s long history of funding rounds and its inability to grow into a successful and popular messaging app platform like WhatsApp, it appears that the SEC views the company’s ICO as a shady last-ditch effort to raise money.
Moreover, following Swanson’s tweet above, he shares a source to a video where Kik’s CEO, Ted Livingston, is discussing the ICO presale and clearly states multiple times that Kin will make its investors lots of money. These statements by Livingston indicate that Kin may very well be a security in the eyes of the SEC.
Is Kik’s Crowdfunding Campaign Another Last-Ditch Effort?
Kik claims that their Kin token is used as a currency, and therefore cannot be labeled as a security. As reported by CoinDesk, Livingston stated:
“In the last month alone, over a million people earned kin from 40 different apps, from 40 different companies. Over a quarter million people used kin, making it the most-used cryptocurrency in the world, and they’re not even willing to say that’s not a security.”
To help support this case against the SEC, Kik launched a website called DefendCrypto.org, which urges people to support Kik in its case against the SEC by donating cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), XRP, and others, including Kik’s Kin (KIN) token.
Kik’s founders say this crowdfunding initiative isn’t just in support of Kik, but rather about showing solidarity with many crypto firms that face potential legal action from the SEC.
According to the firm, they have already spent $5 million on the case, and are committing another $5 million to continue fighting and help benefit the industry.
As stated on Kik’s “Defend Crypto” website:
“After months of trying to find a reasonable solution, Kin has been unable to reach a settlement that wouldn’t severely impact the Kin project and everyone in the space. So Kin is going to take on the SEC in court to make sure there is a foundation for innovation going forward.”
Do you think Kik’s crowdfunding campaign will help Kik’s case in influencing the SEC to create a new Howey Test for crypto tokens? Let us know what you think in the comment section below.