Kik, the Canadian company which created the Kik messaging app, raised close to $100 million in its ICO, making their ICO one of the most successful ICOs ever. It completed its ICO around September 2017, but as indicated by recent events, the SEC is reaching out to companies that had completed ICOs post-DAO and charging them with violating the securities laws.
In November 2018, the staff of SEC (the "Staff") recently notified Kik that it would recommend that the SEC file an enforcement action against them for selling securities in violation of U.S. securities laws. The Staff invited Kik to respond and explain why the SEC should not file an enforcement action against them and Kik responded accordingly.
Kik argues that the SEC should not file an enforcement action against it because:
1. The Kin tokens, which was sold in its ICO were currencies, which are specifically excluded from the definition of a "security" under U.S. securities laws;
2. The Kin tokens are not "investment contracts," as defined by the Howey test; and
3. It would be unfair to punish Kik because it made a concerted effort to comply given what they understood about the regulation of tokens at the time of the sale.
As of now, there are no indications of whether the SEC voted for an enforcement action against Kik. However, if it does, Kik has indicated that it will fight back. Unlike other companies that simply settled with the SEC, if a case against Kik is litigated, it may give the ICO industry much-needed guidance on how the securities laws apply to token sales.
I published a much more extensive breakdown of Kik's arguments in Crowdfund Insider. Kik's full response can be found here.
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