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In the latest update on the ongoing tussle between the U.S. Securities and Exchange Commission (SEC) and Kik, the regulator has said that the firm’s defense of its $100 million initial coin offering (ICO) was “untenable” and should be dismissed.
In June, the SEC sued Kik Interactive, the company behind the chat platform Kik, for conducting an illegal $100 million securities offering of digital tokens in 2017. It alleged that the Kin offering involved securities transactions and that the company was required to comply with the registration requirements of the U.S. securities laws.
Later in August, Kik had responded saying that the commission employed a strategy to “twist the facts, creating a highly selective and misleading depiction of the record.” It argued that as it did not sell “an ‘investment contract’ or any other enumerated ‘security’” in the sale, it did not register with the SEC.
“As applied to Kik’s offer and sale of Kin in 2017, the definition of ‘investment contract’ (as urged by the Commission) is hopelessly vague, and leaves the Commission free to engage in arbitrary and discriminatory enforcement in this space,” Kik said at the time.
Kik CEO Ted Livingston had also accused the SEC of “playing dirty” by trying to “simply make [Kik] look bad.”
In its latest filing, the SEC dismissed Kik’s arguments saying:
“This defense asserts that, notwithstanding 70-plus years of well-settled jurisprudence, the term ‘investment contract’ in the securities laws is void for vagueness as applied to Kik’s investment scheme. This claim is untenable and should be dismissed.”
CoinDesk noted that Kik largely based its case on a “void for vagueness” affirmative defense and is trying to push SEC officials to prove that the SEC itself wasn’t in a position to give regulatory clarity on token sales back in 2017.
However, the SEC has argued that Kik cannot use a “baseless affirmative defense as a justification for irrelevant and burdensome discovery” and added:
“Kik’s answer raises no material issue of fact, and the Court should grant the SEC judgment on the pleadings as to Kik’s first defense.”
Meanwhile, Kik recently revealed that its messaging app had inked a letter of intent with another company, saying “they want to buy the app, continue growing it for our millions of users, and take the Kin integration to the next level.”
Earlier in May, the company launched Defend Crypto – a new campaign to fund its legal battle with the SEC. It said at the time that it was setting aside $5 million with Coinbase for the initiative, which also gained support from ShapeShift, Arrington XRP Capital, and others. Kik later handed over Defend Crypto to the Blockchain Association.
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