Gregory Barber covers cryptocurrency, blockchain, and artificial intelligence for WIRED.
On Tuesday, Kik announced a crowdfunding effort to help it fight the SEC over the company’s 2017 initial coin offering, in which it sold nearly $100 million worth of a token it called kin. The company says it sold a currency that could be used across a network of apps, whether to get paid for taking surveys or to buy new stickers and themes. The SEC disagrees, arguing in a proposed action last November that kin are securities—investments subject to strict rules about how they can be sold.
Kik’s fight has drawn interest from major investors and cryptocurrency exchanges such as Circle, that are hoping for changes in how tokens are regulated. By drawing the SEC into a legal battle, Kik and its backers are hoping the courts will devise rules that would impact a wide array of crypto companies. The catch? The SEC hasn’t taken any action yet, and it’s unclear if it will.
Kik’s ICO was one of thousands that occurred during and after the 2017 crypto boom—many of which turned out to be shady affairs with no intention of following through on their promises. The SEC has since gone after the obvious fraudsters, but the status of more legitimate coins, like kin, is less clear. SEC chairman Jay Clayton has indicated such coins are securities, but the agency has thus far taken a more tentative approach, meeting with companies for more than a year to tease out how coins are being used and what promises were made to buyers.
The result, says Kik CEO Ted Livingston, is a “divide-and-conquer” strategy on the part of the SEC, where companies are individually guided into settlements. “This is happening behind the scenes for every project that did an ICO,” he says. He adds that Kik has already spent $5 million on SEC negotiations.
Kik took its f
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