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US Securities Watchdog Says Desperate Kik Turned to Blockchain Tokens

Last Updated March 4, 2021 2:34 PM
P. H. Madore
Last Updated March 4, 2021 2:34 PM

By CCN.com: According to documents tweeted by lawyer Stephen D. Palley, the government accuses Kik of turning to selling tokens out of desperation. The accusation is part of a motion to discover.

Palley tweet
  Will the SEC pull off a massive win against Kik? | Source: Twitter

Will Kik Open the Floodgates?

The government is looking to ransack Kik as a result of its decision to buck the system. Not everyone  thinks this will go well. Many people have to wonder why Kik is playing ball in quite this fashion, potentially opening itself to a slate of legislative options. If it goes down the way the government wants, things could get mighty nasty for Kik.

Charlie Shrem tweet
  Some people have had a specifically negative experience fighting the government. Charlie Shrem, for example, went to prison. | Source: Twitter

Facebook and Twitter have graciously dominated social media. Alternative platforms see growing usage only in specific subsets of the culture, while the masses will continue to use mainstream platforms regardless of any controversies surrounding them.

Social Media as a Utility And Money Channel

Facebook’s now engaging in some kind of cryptocurrency.

Twitter’s CEO has another company which is in part dedicated to selling cryptocurrency to users.

Kin, though, is nowhere to be found on the social media landscape. Most alternative networks have the same fate. Mainstream systems subsume everybody. It’s in the MySpace category of networks.

If you’re not on Twitter, you’re definitely on Facebook. If you’re off both and onto something like Minds.com, you’re probably some activist or you were banned from either or both.

Some argue that the very fact that you can be banned is reason enough to abandon the platforms.

A free discussion in society is preferable to a censorship-enabled media beast. This much is agreeable. Beyond that, it’s hard to regulate what companies should and shouldn’t do. If a company wants to limit someone’s right to speak on their platform, it’s within their rights to do that. At the same time, after a certain point, social media perhaps should be considered a utility.

Why else would so many use it?

If it were regulated as such , the barbaric data practices would end pretty quickly. Social media companies above a certain size would now be regulatable by several agencies. It would be pertinent to them that they act within the law.

Missy S tweet
  Some people think social media needs regulation. | Source: Twitter

In any case, Kik is being prosecuted as a provider of unregulated securities. Part of the argument on behalf of the SEC is that the company pitched its token as a profitable investment. That means it passes specific measures of the Howey test.

Kin: Security or S**tcoin?

Whether or not the thing will go entirely into effect against Kik is a question now. If they’re found to be violating securities law, they can be ordered to forfeit part or all of what they raised from the token sale. They can be shut down. Or they can be given a pass and a fine and an order to continue in business as a regulated security offering. Most of that is up to the courts in the coming months.

Any given situation makes as much sense as the next.

Kin, for its part, has clearly never taken off. The token could have taken off it had been developed for an actual social network. Instead, it was more of a fundraiser for a failing social network. There’s no reason to believe the token will ever have any value. Perhaps that’s the planned legal defense: you’d have to be stupid to believe the hype.

As with a recent situation involving DJ Khaled and Mike Tyson, it can be challenging to prove that ICO promotion leads to damages. The judge found that it didn’t matter because the complainant couldn’t prove that it was directly related to the promotional materials that he had bought the token. In one case, the complainant had actually bought his tokens beforehand. This made the claims about securities promotion mostly baseless in the eyes of the judge.