The ongoing legal drama between the U.S. Securities and Exchange Commission (SEC) and Kik has ratcheted up, this time with the SEC making their move. The regulator filed a motion to dimiss Kik’s lawsuit against them on October 25, with a follow up discovery request on October 28, ridiculing Kik’s accusations.
CoinDesk reports the SEC is betting this case can easily be dismissed on the grounds that Kik’s “void for vagueness” argument, when concerning the definition of a security, is laughable. They argued in their filing:
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.
All of this revolves around the SEC’s finding that Kin, Kik’s digital asset offering which it held an initial coin offering (ICO) in 2017, was in fact a security. Kik’s lawsuit against the SEC alleges the regulator only came to this conclusion based on the statements of a consultant, rather than the nature of Kin itself.
They also present the affirmative defense that the Securities Act of 1933 should not apply here, as the section defining investment contracts, otherwise known as securities, is too vague to uphold.
The 70-plus years of jurisprudence the SEC points to differs on that point. The 1946 Supreme Court case SEC v. Howey established the “Howey test,” which defined an investment contract as an investment in an enterprise for the expectation of future profit. The SEC has applied that to ICOs and warned they would continue to do so, and courts have agreed with them so far, making it a potentially potent argument against Kik.
Kik’s lawsuit, whenever it gets settled, is trying to prove on the other hand that the SEC is just applying this definition willy-nilly and preying on them unfairly. They’ve also said publically that they will fight this legal battle until the bitter end.
The SEC is hoping that bitter end comes with this dismissal request.
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