The U.S. Securities and Exchange Commission, or SEC, and Kik Interactive have each filed oppositions to one another's motions for abstract judgment on April 24.
While Kik claims its choices had been exempt from registration necessities, the SEC asserts Kik's 2019 preliminary coin providing (ICO) comprised a transparent violation of securities legal guidelines.
Kik and SEC battle it out over Howey Test
Kik maintains that the SEC has unwinnerful to supply adequate proof that it cultivated the expectation of income amongst its clients, or that Kik's buyers entered into a standard enterprise with the corporate - two of the Howey Test's three parts.
The firm notes that its advertising and merchandising supplies explicitly acknowledged that Kik "would be just one of many developers and participants tributary to the winner of the Kin economy."
By distinction, the SEC argues that Kik's ICO dead satisfies the Howey check, declarative that each one Kin tokensale individuals "made an investment of money" into "a common venture" with "a reasonable expectation of profits to be copied from the entrepreneurial or social control efforts of others."
Refuting assertions from Kik founder, Ted Livingston, that Kin has been used as a forex since its launch, the SEC additionally argues that "at no point during its merchandising campaign did Kik identify any specific good or service that could be purchased with kin."
SEC depends on 'poorly reasoned' Telegram case
Kik's normal counsel, Eileen Lyon, advised Cointelegraph that the SEC's case depends too on rulings made inside the Telegram case, declarative that there are important variations between the 2 choices:
"Our tackle the SEC's Opposition is that it depends closely on the current Telegram case which we predict was poorly reasoned and wrong determined. As you realize, the Telegram case shouldn't be binding precedent, so it will likely be attention-grabbing to see what impression it may need, in mild of the many different regime we now have cited and the many factual variations inside the two token choices."
"Additionally, we felt their arguments relating to the "integration" issue were conclusory and circular," she added.
Kik claims exemption from SEC registration
Kik additionally argues that the SEC's movement for abstract ought to be denied on the idea of failing to proof that both of its token points required SEC registration.
The Kik ICO comprised a personal pre-sale to authorized buyers and public token distribution occasion. The firm claims that the 2 gross revenue "didn't contain the "issue of the identical class of securities" and ought to be assessed independently.
As such, Kik argues that the non-public sale comprised the non-public sale of funding contracts to authorized buyers, whereas denying that its token distribution occasion comprised the issue of funding contracts.
"The second transaction, having been conducted after the infrastructure for Kin already existed, and given that it was only a sale of goods to the public, was not an offering of securities. Thus, the sale did not require registration with the SEC."
Further, Kik argues that the SEC unwinnerful to supply it with adequate warning that it power be working in violation of securities legal guidelines:
"The SEC's Motion fails to establish that Kik was provided adequate notice to Kik that the particular facts and circumstances of its sale of Kin would constitute an 'investment contract.'"
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