Kin Picks a Fight with the SEC in Hopes of Inspiring a New Howey Test

CCN: The Kin Foundation is attempting to take crypto regulation into its own hands. In an interview with Laura Shin on the Unchained podcast, Ted Livingston, founder of the Kin Foundation and Kik CEO, unveiled the Defend Crypto fund, which is designed to “fight the SEC in court.” The fund, which was launched on Coinbase Custody, is already comprised of $5 million, which was contributed by the foundation across bitcoin, ether, and Kin. They are also taking contributions by other “frustrated” industry participants.

Ultimately, Ted Livingston wants the SEC to take the company to court in the hopes that an updated version of the Howey Test – the 1946 law that currently determines whether a cryptocurrency should be regulated as a security – will be created. Livingston told Shin:

“The continued challenge for us has been the lack of clarity on the regulatory side.”

BREAKING: @kin_foundation just announced a “Defend Crypto” defense fund that they’re seeding with $5M.

Looks like they are going to take on regulators in court to create a Howey test for crypto.

Things are about to get very interesting https://t.co/wYjFKlumgP

— Pomp 🌪 (@APompliano) May 28, 2019

Kik has already spent months and millions of dollars on its regulatory journey, which in the U.S. began in earnest in the days following its $100 million ICO. Once it became clear that the fight was “beginning to hurt” their business, the team must not have wanted for other blockchain startups to have to go through the same thing. So they decided to put their money where their mouth is. Not only is Kik not afraid to go to the mattresses with the SEC in court, but Livingston is actually hoping that the issue will make its way into the justice system.

“It’s become clear that is the only way we are going to get the clarity we need,” said Livingston.

Chilly North American Regulatory Winds

Kik is a prime example of a blockchain startup that has been caught up by the regulatory winds in North America. Even though the company is based in Canada, they ultimately decided to block local investors from their ICO due to a murky regulatory environment. Kik has since been under siege by the SEC over whether or not the company’s Kin cryptocurrency, which was launched by the Kik team in 2017, should be regulated as a security, which the company has railed against.

The ball is currently in the SEC’s court, as Kik and Kin wait to learn whether or not the regulator plans to bring an enforcement action against them. The SEC has already threatened to take enforcement action against other ICO companies, cases that were settled and never led to litigation. But Kik has no intentions of going quietly into the night. If the securities regulator files an enforcement action against the company or the foundation, they plan to fight it. If things go as planned, it will land Livingston in a court where the fate of the Kin token’s classification and potentially other cryptocurrencies will be decided.

It’s a bold move by the Kin Foundation, one that demonstrates their confidence that they could win a case. Ideally, it would lead to the creation of an updated Howey Test by which cryptocurrency companies could use as a guide in the otherwise murky regulatory environment for blockchain startups. The case could be tied up in courts for years, but it beats the alternative, which is to do nothing or settle.