Why is Kik Challenging The SEC In Anticipated Crypto ICO Court Case?
Ever since initial coin offerings (ICOs) became mainstream, regulators, especially the U.S.’ governmental agencies, have sought to make moves against this newfangled form of funding. The crypto assets from these sales are touted as utility-centric, but incumbents have argued that they resemble securities.
Jay Clayton, a commissioner at the U.S.’ Securities and Exchange Commission (SEC), has claimed on multiple occasions that ICOs are not exempt from the financial legislature. In a speech, Clayton, a Trump appointee, remarked that not only should ICOs adhere to the SEC’s laws, but that such models are inherently risky, touching on the fraud and manipulation that questionable projects could enlist.
Yet, an up-and-coming watershed case could change ICO-issued tokens’ legal classification altogether.
Related Reading: Sign Of The Times: Basis Shutters $133M Crypto Project Due To Regulation
Kik Challenges SEC Over KIN Crypto Offering
According to an exclusive report from the Wall Street Journal, the Ontario, Canada-based social media giant, Kik, is looking into challenging the SEC over its 2017 KIN token offering. Speaking to the Journal, Ted Livingston of the Canadian upstart explained that his firm intends to fight proposed enforcement action over the ICO, which raised $100 million and wasn’t registered with the SEC.
While cynics would claim that Livingston & crew don’t have a leg to stand on, Kik believes that its rebuttal, which is to be filed in civil courts, is valid and could set a precedent for this nascent ecosystem. In fact, Kik’s lawyers even called the financial regulator’s approach to cryptocurrencies “flawed,” writing:
“Bringing the proposed enforcement action against Kik and the foundation would amount to doubling down on a deeply flawed regulatory and enforcement approach.”
If an American civil judge determines that Kik’s ICO wasn’t a securities offering, not only would the firm be safe from hefty fines and other stringent measures, but it could also aid dozens of other projects struggling under the SEC’s iron fist. But will the overseeing judge, who has yet to be named, deem that KIN is out of the SEC’s jurisdiction?
Crypto-Friendly Lawyer: Token Taxonomy Act Could Get Pushed
The precedent that this case could set shouldn’t be the only occurrence that cynics of crypto-related regulations should be looking forward to. Per previous reports from NewsBTC, in mid-December, amid a widespread market meltdown, two U.S. congressmen revealed the “Token Taxonomy Act.” The bill, a bipartisan effort from Warren Davidson of Ohio and Darren Soto of Florida, will disallow the SEC from classifying fully-fledged “digital tokens (crypto assets)” as securities.
Speaking in a statement on the matter, Davidson noted:
“In the early days of the internet, Congress passed legislation that provided certainty and resisted the temptation to over-regulate the market. Our intent is to achieve a similar win for America’s economy and for American leadership in this innovative space.”
While the integration of such a bill would likely revitalize this industry, the Token Taxonomy Act is still months, if not years away from going live in the real world. Jake Chervinsky, a crypto-friendly attorney at Kobre & Kim, recently took to Twitter to note that there will likely be “months or years of Committee hearings & revisions” before the bill could reach a voting stage.
I don't know if there's any validity to the rumor that the Token Taxonomy Act will be reintroduced in Congress on February 14, but even if true, there will be months or years of Committee hearings & revisions before the bill could even possibly see a vote. Don't hold your breath.
— Jake Chervinsky (@jchervinsky) January 26, 2019
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by Nick Chong on January 28, 2019 at 05:30AM