A U.S. judge stated on Wednesday that Kik has violated the securities law when it raised nearly $100M through token sale back in 2017. The U.S district judge for the Southern District for New York, Judge Alvin Hellerstein, ruled that Kik’s token distribution event satisfied the 3 prongs of the Howey Test referring to the Supreme Court Case used as a standard for finding if the sale of something is a security sale or not.
The SEC or Securities and Exchange Commission which registered the suit against Kik last year stated that the messaging platform’s Kik token sale was unregistered security offering whereas Kik argued it was not.
Initial coin offerings (ICOs) and token deals have been treated as unregistered protections deals generally by the SEC, which has recorded suits against various new businesses and organizations, including Telegram, another informing organization that raised a mammoth $1.7 billion.
A considerable lot of these cases use Howey, which says something may be secured if there is speculation of cash in a typical endeavor, with the desire for the benefit, principally from the endeavors of others.
Judge Hellerstein composed Wednesday that Kik praised Kin’s benefit making potential,”\ fulfilling one of the prongs and that Kik pooled continues from its deals of Kin with an end goal to make a framework for Kin, and in this manner support the estimation of the venture.
In an announcement, Kik CEO Ted Livingston said he was disappointed in this decision, and that the organization is thinking about its alternatives, including a possible allure.
Eileen Lyon, the general counsel of Kik took goal at the SEC in a statement, stating that the agency should incorporate proper rulemaking along with the opportunity for public commentary instead of forcing the industry to search for regulatory clue among the SEC’s conflicting statements, staff-speeches, closed-door meeting, the no-action letter with the SEC.
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