Ted Livingston, founder of the popular Canadian messaging app Kik, has tried not to tangle with regulators, at least until now. He responded to Canada’s murky regulatory framework by blocking residents of his home country from participating in the company’s ICO. The Ontario-based startup managed to raise a cool $100 million in the token sale despite the lack of Canadian participation, but regulators in the lower-48 may be taking their own shots at the sleeping giant.
You Can’t Fight City Hall. Or Can You?
The SEC appears to be on the verge of bringing charges against Kik for what Livingston described as a “securities infraction.” The Kik chief maintains, however, that the KIN coin is a currency, not a security, pointing to “hundreds of thousands of people [that] have exchanged Kin for goods and services” across dozens of apps in Google Play and the App Store.
While there’s no way to tell which way the vote will go, the SEC has not been kind to the market of late, with a string of Bitcoin ETF rejections and recent charges against two other ICO companies. In a statement, Kik told Crypto Briefing:
We are unsure of how the Commision will vote, but we believe that any enforcement action against Kik, Kin, and the foundation would be detrimental to the entire cryptocurrency industry.
For that reason, Livingston has taken it upon himself to fight for the future of Kin as well as for anyone who believes “cryptocurrency has the potential to positively change the world.”
The Kin team has their work cut out for them, given SEC Chairman Jay Clayton’s previous landmark statement that “I believe every ICO I’ve seen is a security.”
Livingston has taken on Goliath before, however, and could probably commiserate with the Winklevoss twins. Livingston has reportedly accused Facebook of copying his messaging app’s every move, and has predicted that eventually, Mark Zuckerberg could launch a cryptocurrency that looks a lot like the Kin token.
The most concerning aspect of the SEC’s probe into Kik is that the communication between regulators and the company started off on a good foot. In fact, it wasn’t until several months after the Kin ICO was announced that the Wall Street regulator finally reached out.
Since then, however, the tone of the inquiries took a turn, leading to subpoenas, formal testimony, and then in November 2018 a Wells Notice, which often precedes enforcement actions by the US regulatory body. Perhaps Livingston was worrying about the wrong regulators, when he excluded Canadian, but not US, investors.
If the SEC brings charges against the company, Kik and the foundation plan on taking the fight to the courts, according to Kik’s response to the Wells Notice.
SEC rumblings tend to spook investors; although there’s no indication that this was the reason for today’s selloff, it probably didn’t help market sentiment. The coin is down 10% in the last 24 hours, with most of the trading unfolding in the KIN/CNY pair.
But we really can’t blame Kik for the sell-off. As crypto analyst Joseph Young pointed out, the market has been stuck in the doldrums for a while:
If the crypto market dropped 48 hours ago, "ETF withdrawal caused the market to drop!" headlines would have dominated
Truth is, crypto market has been in the same low range for a long time pic.twitter.com/PqKKGJ6uUu
— Joseph Young (@iamjosephyoung) January 28, 2019
*This story has been updated to reflect Kik’s response to the SEC’s Wells Notice.
The author is invested in digital assets, but none mentioned in this article.