The U.S. Securities and Exchange Commission (SEC) has been battling Kik over its digital asset initial coin offering (ICO) since the middle of 2019, arguing that it was offering an unregistered security. The social media platform was offering its KIN digital token to raise funds for development, but the financial regulator argued that it violated securities laws. Kik has been forced to completely disrupt its operations as it decided to fight the SEC, but has met substantial difficulty at every turn. Now, tired of drawing out what it sees as an already-victorious battle, the SEC wants a judge to rule in its favor and bring the case to an end.
Kik offered the ICO in 2017, the year that many similar offerings were seen as BTC started to gain a lot of attention. At the time, there were no rules specifically targeting digital assets and their sales, although guidance was being created, and the SEC has since gone after a number of organizations that introduced ICOs without authorization. Of Kik’s efforts, it stated, “Kik’s 2017 offer and sale of Kin was an offer and sale of investment contracts to the public, which was not registered with the SEC, and for which there was no exemption from registration under the act.”
The ICO might not have become an easy target if Kik hadn’t broken one of the fundamental rules regarding investments. It asserted that Kin’s value would increase as demand rose, and the SEC has strict rules against entities suggesting any type of return from an investment vehicle. The fact that Kik also said that it would work to ensure that demand happened didn’t sit well with the SEC, either.
Looking at the details of the ICO and the guidelines for offering a securities investment vehicle, the SEC is asking the courts to step in and prevent the case from dragging out in court any longer. It wants a summary judgment to be issued, effectively giving the win to the SEC and forcing Kik to refund the more than $100 million it received from investors.
The SEC had tried to get the lawsuit thrown out before. Last October, it argued that Kik’s case was based on its assertion that the SEC laws were vague, which the regulator denied. It filed a motion with the courts for the lawsuit against it to be thrown out; however, it didn’t have any luck. A judge rejected the request, as well as Kik’s “vagueness” claim, and allowed the case to continue.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.