A US judge has ruled that Kik’s $100 million initial coin offering (ICO) in 2017 violated several federal securities laws. The SEC filed the lawsuit against Kik last year, claiming that the messaging platform’s Kin token, an Ethereum blockchain-based cryptocurrency, sale was an unregistered securities offering.
The SEC has been working hard to target a number of ICOs and token sales. As it stands, they believe that ICOs and token sales should be treated as unregistered securities sales. The SEC has filed a number of lawsuits against companies, including Telegram, which successfully raised an astonishing $1.7 billion. Telegram deserted its plans and settled with the SEC, agreeing to pay a fine of $18.5 million to the SEC and to return $1.2 billion to investors.
Judge Kellerstein ruled that Kik’s 2017 token sale meets the definition of a securities issuance in terms of the Howey Test, because the ICO participants had a reasonable expectation of profit.
This judgment, however, does not bring the case to a close just yet. Kellertsein’s order states that both sides are to “jointly submit a proposed judgment for injunctive and monetary relief.” If they cannot agree on a proposed judgment, they should note their differences in a single document to be submitted on 20 October 2020.
It does not seem likely that Kik is ready to give up on the fight just yet. In a statement, Kik CEO, Ted Livingston, said he was “disappointed in this ruling,” and that the company is considering its options, including a potential appeal.