Flipside Daily Mover: KIN
A coin per day, making big moves
KIN Legal Battle with SEC Evolves As Kik App Shuts Down
September 24, 2019
KIN FCAS declined -0.47% over the last 7 days, impacted by a 5-point (-0.57%) drop in Developer Behavior. User Activity held steady while Market Maturity descended 12-points (-1.83%). Price is down 30.20% over the same time period.
What is KIN?
Kin is a cryptocurrency started by the Canadian mobile messaging service, Kik. The Kik team held a $98 million ICO for the asset in 2017, and launched their mainnet (a fork/copy of Stellar, XLM) in 2019. The asset was introduced to users of the Kik Messenger as part of a beta program in June 2018 and was targeted for integration with other mobile offerings this year, such as the community-centric social media application, Tapatalk.
The Gloves Come Off
Kik CEO Ted Livingston announced yesterday that his company would be shutting down the Kik core messaging service to focus on their KIN cryptocurrency as the team prepares for a high stakes legal battle with the SEC. The move will displace more than 100 employees, as operations are reduced to 19 core developers supporting the Kin blockchain.
These developments emerged following an intense legal dance between KIN and the SEC initiated when the regulator began questioning the legal status of the asset earlier this year. Kik spent $5 million in negotiations with the SEC before launching a very public Defend Crypto crowdfunding campaign on May 28th via the popular crypto podcast, Unchained, seeking to raise another $5 million in funds for their legal engagement.
Officials at the SEC were unphased, suing Kik shortly thereafter on June 4th, for violating Section 5 of the Securities Act of 1933, requiring security offerings to be registered. Ultimately, the Kik/Kin legal battle will focus on the SEC’s Howey Test used to identify whether or not an asset should be characterized as an investment contract.
🌶️ Hot Take
Kik is at the bleeding edge of the crypto community’s efforts to forge clarity around the treatment of digital assets under US securities laws. The case has been viewed across the industry as a litmus test for the SEC’s views on the legal status of ICO offerings, particularly given their relative ambiguity thus far around US regulation of the digital asset industry.
Details from the SEC filings are quite critical of Kik actions and potential missteps leading to the ICO launch, and the regulator has a pretty solid foundation for its case. Nevertheless, Kik and its legal team have also raised a number of valid counterarguments, particularly around KIN being a digital currency, implying the Howey Test in its current state is ill-equipped to act as a barometer in determining the asset’s status as a security. Livingston and crew recognize the potential consequences of this case for their company and the industry as a whole and have transitioned to a battle-ready posture to carry the fight forward.
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