The SEC's Action
On June 4, 2019, the SEC sued Kik Interactive Inc.
("Kik"), a privately held Canadian company, in the
Southern District of New York, alleging that Kik's offer and
sale of $100 million worth of Kin tokens in 2017 constituted the
unregistered sale of securities in violation of section 5 of the
Securities Act. In a nutshell, the SEC asserts that, although Kik
filed a Form D exemption from registration for the offering, the
Kin sale did not qualify for the exemption because the tokens were
offered and sold to the general public, not exclusively to
accredited investors.
Importance
This case could yield guidance from a court on whether and when
tokens constitute securities, to substitute precedential law for
the SEC's pronouncements in settled enforcement actions and
guidance issued by its Divisions. The SEC charges that Kin tokens
are securities under the Howey test. As a result of
Kik's failure to register the tokens, the SEC alleges,
investors did
