I’m not an attorney; this is not legal advice.
The SEC is seeking an enforcement action against KIK, a messaging app, for alleged securities violations during their 2017 ICO. It’s shaping up as a landmark case. This legal stuff gets so dense it’s intimidating. But having read a few stories it seems somewhat straightforward.
KIK, says their “currency”, KIN, is exempt from securities laws because currencies get securities exemptions, KIK attorneys maintain. The problem seems to be comments – written or oral – KIK reps may have made to investors. Saying “KIN will go to the MOON”, for example, would be a big no-no. To be clear, I have no idea what their docs or team said, but I suspect they didn’t say “MOON”. I’d hope not.
Judge Creadon – boy that sounds funny – might rule this way: if currencies are exempt, then let them be. The currency distinction seems the vital precedent. If comments were made that didn’t toe the line precisely, can’t a fine be paid? Must we kill a promising fintech project on a careless error? Mistakes get made; a civil penalty may be a reasonable middle ground. We all want cryptos to advance in a compliant manner. Regulators should embrace the newness of blockchain & demonstrate a modicum of leniency at some tolerable price.