Kik messenger is seeking pre-trial summary judgment in its legal dispute with the United States Securities and Exchange Commission (SEC) over an initial offering of $100 million (ICO) in 2017.
On 20 March, Kik submitted a memorandum of law requesting a summary judgment from the court stating that the SEC had failed to demonstrate that its KIN tokens included unlicensed securities.
Kik messenger is expecting a legal victory
Referring to its public sale as a token distribution event (TDE) rather than an ICO, Kik argues that its KIN tokens do not meet two of the three safety requirements set out in the Howey Test.
In the first place, Kik argues that its TDE did not form a “common enterprise” between the company and the purchasers of its tokens — supposing that the terms of sale only required Kik to deliver the tokens and that it had “absolutely no control over the tokens” once issued.
Kik also argues that it has exclusively promoted its Kin tokens as a medium of exchange rather than an investment opportunity:
“the SEC cannot show that Kin purchasers were led to expect profits from the essential managerial and entrepreneurial efforts of Kik or others, as Howey requires. The undisputed facts show that Kik promoted Kin as a medium of exchange to be used in a new digital economy, not as an investment opportunity.”
SEC claims to posses have ‘undisputed evidence’
On the same day, the SEC lodged an application for summary judgment, claiming that it had “undisputed evidence” that Kik’s ICO had distributed unlicensed securities.
According to the SEC, Kik has made it clear to investors that KIN prices are rising alongside increasing demand for tokens — for which the issuer has promised: “undertake crucial work to spur that demand.”
“Kik’s 2017 offer and sale of Kin was an offer and sale of investment contracts to the public, which was not registered with the SEC, and for which there was no exemption from registration under the act,” the SEC argued.
Curiously, both the SEC and Kik appear to be extremely confident that they will win the case in a summary judgment.
While Kik believes that it sold tokens only to accredited investors and that its sale was exempt from the registration requirements of the Securities Act, the SEC describes the dispute as “a straightforward case in which Kik’s investment scheme and violations of Section 5 are easily identified.”