In what will likely set a game changing precedent U.S. District Judge for the Southern District of New York Judge Alvin Hellerstein sided with the Securities and Exchange Commission (SEC) by ruling in favor of the agency’s motion for a summary judgment in its lawsuit against tech company Kik, and its $100 million initial coin offering (ICO) that triggered the long-running legal dispute.
Judge Rules Canadian mobile messaging startup’s token sale violated US securities law
The SEC filed the suit against the Canadian mobile messaging startup last year, saying the messaging platform’s Kin token sale was an unregistered securities offering, while Kik claimed it was a functional currency.
“This clash of definitions and interpretation was long overdue, but I doubt we’ve heard the end of it,” said BG Capital Group Chairman Bobby Genovese who, like many in the financial world had been following news of this landmark legal battle.
“It’s already an uphill battle for any new product launch or iteration but especially so for something as universally challenging as this. It will be interesting to see how this industry evolves over time.”
The September 30, 2020 ruling reportedly satisfied the three prongs of the Howey Test, referring to the U.S. Supreme Court case used as a standard for determining whether the sale of something is a securities sale.
ICOs and token sales have traditionally been treated as unregistered securities by the SEC, which has filed suits against numerous startups and companies, including Telegram, another messaging company, that raised a mammoth $1.7 billion.