Kik Interactive Inc. is considering appealing a ruling that came down this week siding with the United States Securities Commission (SEC) that the Canadian cryptocurrency company violated securities laws.
“The ruling may raise more questions than it answers.”
– Eileen Lyon, Kik general counsel
The ruling was part of an ongoing lawsuit brought against Kik by the SEC last year. The US District Court for the Southern District of New York made its decision on September 30. It found in favour of the SEC, which claimed that Kik violated securities law by failing to register the 2017 distribution of its Kin tokens.
“We are obviously disappointed in this ruling,” said Kik founder Ted Livingston in a statement about the decision. “We are considering all of our options, including filing an appeal.”
Livingston reiterated previous statements, arguing that Kik continues to believe that the public sale of Kin was that of a functional currency and not a sale of securities.
The ruling from the US district court follows a long and public battle between Kik and the SEC, which began in 2017 after the SEC started to investigate Kik for its $157 million CAD token offering.
The SEC’s pursuit of Kik led to the initial shutdown and eventual sale of Kik’s app and the acquisition of its employees, late last year.
“We soon came to the realization that we can’t afford [Kik],” said Livington last year regarding the decision to shut down the Kik app. “When we looked at all the options, we said we need to shut this down. By focusing on Kin, [we’re hoping] we can help save everything else.”
With the sale of the Kik app, the Kin Foundation, which is a separate entity from Kik Interactive, has continued to operate the Kin ecosystem. In November, it was announced that the Kin ecosystem had reached over a million active-spending users, including peer-to-peer and consumer-to-business transactions across more than 80 applications.
Throughout the dealings with the SEC, Livingston continually called out the agency for its focus on Kik. He argued that the US agency’s argument against Kik was flawed and called for better regulations in the securities and cryptocurrency space.
RELATED: Ted Livingston says Kik will not stop fighting until it has “no dollars left”
“Kik has always supported the Commission’s goal of protecting investors, and we take compliance seriously,” Livingston said in his recent statement regarding the ruling. “In preparing for the sale of Kin, Kik retained sophisticated counsel (both in the United States and internationally) to analyze the law as we understood it, and we continue to believe that the public sale of Kin was that of a functional currency and not a sale of securities.”
“While this is a setback for Kik, this decision does not impact the Kin Foundation, the Kin token and the growing ecosystem of developers making Kin the most used cryptocurrency by mainstream consumers,” he added.
In the same statement, Kik’s general counsel, Eileen Lyon, called for the SEC to “engage in proper rulemaking” to provide clarity to companies like Kik.
“The ruling may raise more questions than it answers, since it applies only to our original token distribution,” Lyon said. “The SEC should engage in proper rulemaking, including the opportunity for public commentary, rather than force our industry to hunt for regulatory clues among the SEC’s conflicting statements, Commissioner and staff speeches, no-action letters, closed-door meetings with the SEC, and nonprecedential settlements.”
The US court did not rule on any relief Kik may owe, however, the SEC is reportedly seeking a permanent injunction, civil penalties, and disgorgement. Both Kik and the SEC have until October 20 to respond to the ruling.
When reached for comment, Kik’s general counsel pointed BetaKit to the company’s public statement. In response to whether Kik has made the decision to appeal, Lyon told BetaKit, “we are evaluating all options, but the time for appeal doesn’t begin until after Judgment is entered, which will be after the [Octover 20] deadline to submit proposed remedies as stated in the Order.”