Canada’s Kik to Challenge ICO Authority of SEC in Court
The decision comes after Kik received documents in which the US regulator claims the token issuer targeted American investors with an unregistered security in its 2017 ICO.
Canadian blockchain-base chat platform Kik Interactive intends to mount a legal challenge to the US Securities and Exchange Commission (SEC) over tokens issued during its initial coin offering (ICO), CEO Ted Livingston told the Wall Street Journal (WSJ) on Sunday. The move comes after the regulator’s enforcement division accused Kik of offering unregistered securities to American citizens during the 2017 ICO, documents seen by the newspaper show.
Currently, it is unclear whether the SEC commissioners have authorized the enforcement action. The SEC declined to comment for the WSJ.
In 2017, Kik raised $98 million by selling one trillion Kin (KIN) tokens. According to Livingston, the coins are designed as a payment vehicle across the chat platform and other upcoming projects, which should create a token ecosystem. An additional three trillion tokens are owned by the Kik, and six trillion are held by Kin’s related non-profit foundation.
The assets are utility tokens and have been marketed in this way since their issuance, the CEO explained, adding that they do not come under the SEC’s remit. Last month, Kik wrote a 39-page response to the SEC, denying the accusations.
“Bringing the proposed enforcement action against Kik and the foundation would amount to doubling down on a deeply flawed regulatory and enforcement approach,” Kik’s lawyer writes in the rebuttal.
The US regulator uses the so-called Howey test, which is based on a 1946 Supreme Court ruling on which offerings are securities. The test defines as security any investment contract where “a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.” In recent months, the SEC has accused several ICO issuers of breaching US federal laws by offering unregistered securities.
Currently, KIN ranks at number 129 on the cryptocurrency market capitalization list with $19.6 million in value. The token was trading at $0.000026 at 11:30 UTC on Monday, or 12.7% down on a daily basis, as per Coinmarketcap data.