The U.S. Securities and Exchange Commission (SEC) has sued Kik
Interactive, Inc. (Kik), the owner and operator of Kik Messenger, a
mobile messaging app, in federal court claiming that Kik’s
2017 $97-million crowdfunded initial coin offering (ICO) was an
illegal public offering.
Cryptocurrency and ICO’s
Cryptocurrency is “virtual currency” that uses
blockchain technology to control the creation of digital tokens and
operates independently of banks. Bitcoin and Ether are well-known
examples of cryptocurrency. An ICO is an offering of
cryptocurrency. ICO’s are usually conducted via crowdfunding,
often by startups seeking to raise money for a new app or
service.
The Kik Case
The predominant question in the Kik case is whether
cryptocurrency is a security, the public offering of which would
require registration under the Securities Act. The Securities
Act’s definition of the term “security” includes
the term “investment contract.” While the definition
