Four Commissioners at the SEC are About to Vote on the Future of Crypto in the U.S. You Need to Know Why We’re Fighting Back.
Today the Wall Street Journal published an article about the SEC’s upcoming decision on whether or not to file suit against Kik for our 2017 token sale.
This comes after SEC Chair Jay Clayton said “I believe every ICO I’ve seen is a security.” That includes almost every cryptocurrency, from Ethereum on down.
This is the thing that everyone in the industry is dealing with, but nobody wants to talk about. For all of us to be able to continue hiring, innovating, and competing, we need to change that.
We first heard from the SEC a few days after our token sale had already started, four months after we first announced it. It was a friendly contact for information, which we happily responded to.
Since then, our conversations slowly ramped up — first with more questions, then with subpoenas over the winter, and then formal testimony in Washington over the summer. This process culminated with them issuing us a Wells Notice on November 16, 2018. This notice outlines why the SEC thinks there has been a securities infraction.
On December 7, 2018, we submitted our Wells Response. This response outlines the many reasons why we think there has not been an infraction. We have published a copy of that notice and our response here.
The next step is for the SEC staff to take these two documents and decide if they want to make a recommendation to the four SEC commissioners to authorize a case against us.
This situation is not unique to Kik. There are dozens of projects at a similar point with the SEC. We all believe that this industry needs regulation, but we also believe that this is not the way to get it.
There are many reasons why Kin and others do not satisfy the Howey Test, which you can find in our Wells Response that includes many examples from case law.
But there is also a simpler reason. On page 11 of the 1934 Securities Exchange Act, the very act that created the SEC, it explicitly states that the definition of a security “shall not include currency.”
Today you can earn and spend Kin in over 30 apps live in the Google Play and iOS App Stores. Already, hundreds of thousands of people have exchanged Kin for goods and services. Kin is one cryptocurrency that truly is a currency.
Crypto is set to usher in the next wave of widespread innovation. If we want that innovation to include the United States we need to start talking about what is happening behind the scenes. We are all in this together.