Instant messenger play Kik, which launched an initial coin offering for its kin token in 2017, is escalating its regulatory struggle against the U.S. Securities Exchange Commission (SEC).
That’s per Kik chief executive officer Ted Livingston, who announced on May 28th that the company and the Kin Foundation, which he helped found, would be spearheading a new initiative in DefendCrypto.org — a coordinated crowdfund campaign centered around fighting the SEC in court to push back against tokens like kin being considered securities in the U.S.
Back in January, Livingstone made waves in the cryptoeconomy when he revealed that his company’s interactions with the SEC suggested the agency was going to imminently declare the kin ICO as an unregistered securities offering.
At the time, the CEO and other analysts in the space speculated a consequential court case was all but imminent between the Commission and the token’s backers.
Kin establishes $5 million https://t.co/siUfXXPZgc fund to take on the SEC. Support from @coinbase, @Circle, @MessariCrypto, @ShapeShift_io, @fredwilson and others. #bitcoin #ethereum #crypto https://t.co/uGt63PCkiZ
— Erik Voorhees (@ErikVoorhees) May 28, 2019
Fast forward several months to mid-May, and Livingstone revealed Kik had already spent $5 million USD in out-of-court negotiations with the watchdog. As the legal battle may soon turn hot, Livingstone and his peers have now launched DefendCrypto.org to fund the fight going forward, with Kik having committed another $5 million in kin, bitcoin, and ether to the cause.
However, Kik’s leadership has cast the campaign as one that could affect how all cryptocurrency projects are treated in the U.S. and has enlisted the support of major crypto enterprises like Coinbase, ShapeShift, Circle, and Messari to illustrate that point. DefendCrypto’s landing page accordingly reads:
“For the future of crypto, we all need Kin to win. This case will set a precedent and could serve as the new Howey Test for how cryptocurrencies are regulated in the United States. That’s why Kin set up the Defend Crypto fund to ensure that the funds are there to do this the right way.”
The so-called Howey Test is a test devised by the U.S. Supreme Court in the mid-twentieth century to determine whether a given transaction was an investment contract, i.e. a security. In recent years, the American cryptocurrency scene has been clouded by the question: can cryptocurrencies be securities per the Howey Test?
That dynamic has led many cryptoeconomy stakeholders to argue the SEC has stifled innovation in America by not answering that question sooner and with reasonable clarity.
The Commission’s leadership, on the other hand, seems inclined to think they’ve been clear enough on the subject in light of their 2017 DAO report and remarks from the watchdog’s chairman, Jay Clayton, who testified to the U.S. Senate early last year that “I believe every ICO I’ve seen is a security.”
Notably, Kik’s funding blitz comes on the heels of the cryptocurrency trading platform Poloniex, which is backed by DefendCrypto.org supporter Circle, delisting nine cryptocurrencies for its American users earlier this month.
In their delisting announcement, the exchange cited uncertainty as to whether the assets were unregistered securities per the SEC as the reason for the retreat. The platform’s leadership said the company would remain committed to fighting for better regulatory clarity in America:
“We believe in the power and potential of these assets, and will continue to focus time and energy on supporting positive policy and regulatory developments for crypto assets.”
For their part, the SEC is hosting a fintech forum centered around distributed ledger technology and blockchain assets on May 31st. The Commission has said the forum is “designed to foster greater communication and understanding,” but it remains to be seen if or how the watchdog will approach the DefendCrypto.org effort at the event.
Damn. Between KIN’s legal defense fund (hosted by Coinbase) and Circle’s post from last week, things are getting seriously heated on the regulatory front.
— Katherine Wu (@katherineykwu) May 28, 2019
In the very least, it’s clear that Kik is drawing a line in the sand and preparing to hold its ground — for better or for worse.