Kik Interactive, the company behind the popular “Kik” messaging platform, has issued a warning that it may decide to sue the U.S. Securities and Exchange Commission (SEC) over a potential enforcement action against the platform’s initial coin offering (ICO).
Fight with the SEC
The token sale, which took place in 2017, resulted in raising almost $100 million. Around 10,000 investors bought 168,732 Ethers, which accounts to around $47.5 million. In addition, a pre-sale organized for institutional investors earned the company around$50 million.
The Canadian-based startup is now gearing up for a fight with the SEC as it expects an enforcement action ruling against its token sale, the CEO Ted Livingston told The Wall Street Journal.
The startup reiterates its currency, Kin, is not “an unregistered security” as labelled by SEC.
The labelling came during a hearing before the U.S. Senate in February last year, when SEC’s Chief Clayton noted that “every ICO I’ve seen is a security”.
Livingston now confirms his company has been involved in a conversation with SEC, which resulted in the issuing of a Wells Notice in November 2018. Within weeks from receiving the notice, Kik responded by outlining why they think there has not been an infraction, Livingston confirmed via Medium.
“On page 11 of the 1934 Securities Exchange Act, the very act that created the SEC, it explicitly states that the definition of a security “shall not include currency”, notes Livingston.
“This situation is not unique to Kik. There are dozens of projects at a similar point with the SEC. We all believe that this industry needs regulation, but we also believe that this is not the way to get it,”.
According to rules and regulations, the SEC will now decide whether to authorize a case against Kin. Whatever the final outcome is, this legal battle will have broad ramifications for the entire crypto industry.