Early on in June 2019, the U.S. Securities and Exchange Commission (SEC) had sued the Canada-based company Kik for allegedly running an unregistered securities sale when it had launched an ICO (initial coin offering) in 2017 for its Kin token. Now, very recently, both the parties have advocated for settling the discourse once and for all with a fine of $5 million. However, as per public court documents, the agreement still needs the consent of the presiding federal district court judge Alvin K. Hellerstein.
This proposed joint settlement severely apprises Kik against any future violations of the U.S. securities laws. Some of the other terms state that Kik must give the SEC a notice of minimum 45 days prior on any transactions related to the Kin token treasury. The notice order expires within three years of the judgment taking effect.
A similar lawsuit filed by the securities regulator against the networking platform Telegram caused the firm’s blockchain project, the TON or the Telegram Open Network, to shut down even before its launch.
To avoid a similar fate met by TON, Kik had originally announced it would fight the SEC in court if push came to shove, hopefully creating a precedent for how token sales might be treated under the U.S. securities law. However, the company pulled back from a jury trial request in March, 2020, and also lost a motion for summary judgement in September.
At that time, a judge had ruled that Kik’s issuance of Kin was an investment of funds in a joint enterprise aimed to only heighten the token’s price, positively satisfying the Howey Test- a U.S. Supreme Court case used as a guideline for determining whether an asset is a security or not. Post that, the General Counsel and Chief Compliance Officer at Kik, Eileen Lyon, had commented that the SEC should create clear rules for the crypto industry, instead of putting out “conflicting statements” and other non-binding forms of guidance.
Happy Ending for Kik
The settlement, however, only asks that Kik let the SEC know of any Kin sales they have planned within the next three years, ensuring the Kin token doesn’t get pulled down. Therefore, it seems like once approved, the settlement would reverse the massive loss Kik seemed to have been hurtling towards even only a month ago.