By CCN: Canadian mobile-messaging company Kik is preparing to fight the SEC tooth-and-nail when the agency sues the firm over its $100 million ICO.
Many companies settle to avoid a protracted and expensive legal war. However, Kik says the best way to force the Securities and Exchange Commission to issue regulatory clarity is through a full-scale court battle. So that’s what it’s doing.
Kik’s proactive defensive maneuver mirrors the tactic that Facebook is employing. The social media monopoly is preparing to clear potential regulatory hurdles before it launches its own cryptocurrency.
To this end, Facebook is lobbying and pandering to regulators around the world to grease the wheels ahead of its token roll-out, the Information reported.
“Facebook executives are already busy courting regulators in the various countries where they plan to launch the token. The process could take a while — selling officials on the idea of a single global currency issued by a private company probably won’t be easy.”
Kik told CCN that the outcome of the SEC’s lawsuit against it could have major implications for the future of cryptocurrencies in the United States. And that’s why it wants to face off against the SEC in court instead of rolling over.
“We believe that any enforcement action against Kik, Kin, and the Foundation would be detrimental to the entire cryptocurrency industry.”
The SEC filed a lawsuit against Kik and its affiliated foundation, the Kin Foundation, over the $100 million ICO Kik launched in 2017.
To prepare, Ted Livingston — the founder of Kin and the CEO of Kik — is trying to raise money through a legal-defense fund called Defend Crypto.
The Kin Foundation seeded the fund with $5 million and is soliciting donations. The crypto industry kicked in with $4.9 million in contributions.
In court, Kik will argue that its Kin token is not a security, and therefore, should not be regulated by the SEC. The legal quagmire erupted in December 2018, when U.S. Congressmen Warren Davidson and Darren Soto introduced the Token Taxonomy Act. They then re-introduced it in April 2019, where it now languishes in legislative limbo.
As CCN reported, the Token Taxonomy Act would amend the Securities Exchange Act to specifically exclude cryptocurrencies from securities laws.
“This bipartisan legislation draws a bright line for businesses and regulators by defining a ‘digital token,’ and clarifies that securities laws do not apply to companies that use blockchain once they reach their goal of becoming a functional network.”
Congressmen Davidson and Soto said the “light-touch” legislation would provide much-needed regulatory clarity about whether cryptocurrencies are securities that should be regulated by the SEC.
In addition, the lawmakers argue that the Token Taxonomy Act would ensure that the United States remains competitive in the budding industry by not strangling it with unnecessarily cumbersome regulations.
“Virtual currencies and the underlying blockchain technology has a profound potential to be a driver of economic growth. That’s why we must ensure that the United States is at the forefront.”
The SEC has been under fire for not offering more regulatory clarity to the crypto industry, even as it launches harsh enforcement actions.
The SEC’s sneaky tactics are not a surprise to billionaire Mark Cuban, who trashed the agency as “useless” bureaucrats who file frivolous lawsuits against investors to justify their worthless existence.
“I’m obviously not a fan of the SEC,” Cuban told CCN. “I think they prefer regulation through litigation and that creates problems for everyday investors.”
After the SEC sued Cuban in 2008 for alleged insider trading, he fought them in court for five years. In 2013, Mark Cuban was vindicated when a jury acquitted him of all charges.
Cuban spent more money defending himself against the SEC lawsuit than the fine he could’ve easily paid to end it. Why? Because he says the SEC are bullies, and you should never back down to a bully when they’re wrong. “You take all these years of my life — it’s personal,” he said.
This article was edited by Samburaj Das.
Last modified: May 20, 2020 9:58 AM UTC