The coming trial against Kik will be the first time that the SEC has its views on ICOs truly tested in court. But will it give crypto the clarity it seeks?
It’s been billed as the cryptocurrency trial of the century—the mother of all digital-asset disputes. And the outcome could determine the future of token-based fundraising, as well as the fate of hundreds of ICO-funded startups with coins already in the wild.
The U.S. Securities and Exchange Commission filed suit against the Canada-based messaging app company Kik on Tuesday over its 2017 ICO, which the SEC claims raised nearly $100 million in an “illegal securities offering of digital tokens.”
And though the move was expected, it’s what comes next that has left the $250 billion crypto industry with an unsettling sense of anticipation.
The Commission’s lawsuit against Kik marks the first time that the SEC has charged a company with violating federal securities laws through an ICO, alleging no act of fraud or other wrongdoing, without the accused opting to settle its case. Unlike Airfox, Paragon Coin, Gladius Network, or even Munchee (whose token sale was stopped before it started), Kik has vowed to fight the SEC’s charges until the bitter end.
At issue is the SEC’s interpretation of the Howey test—the nearly century-old, three-pronged measuring stick by which federal regulators determine whether an asset qualifies as a security—as it applies to the sale of digital assets pitched during ICOs.
If Kik stays true to its word, and the lawsuit goes to trial, the SEC’s position on blockchain-based token sales and ICO fundraising will at last get its big-stage courtroom debut.