The fight between Kik and the Securities and Exchange Commission (SEC) is heating up. Recently, Live Bitcoin News reported that Kik was looking to remove itself from the SEC’s rules and guidelines through a special crowdfunding project. Now, the SEC has announced that it is suing SEC for potentially violating its rules with the $100 million initial coin offering (ICO) it held two years ago in 2017.

The SEC and Kik Head to Court

In what is arguably one of the largest crackdowns of a cryptocurrency or digital asset-related company yet, the SEC has announced that all the tokens sold in the ICO are not registered with the organization. Leaders of the group are accusing Kik of purposely moving around the SEC’s laws and conducting what it calls an “illegal securities offering.”

Steven Peikin, co-director of the SEC’s Division of Enforcement, explains:

Companies do not face a binary choice between innovation and compliance with the federal securities laws.

While Peikin clearly appears in favor of innovation and growth, he isn’t giving Kik any excuses, and believes that the coins should have been registered with the agency before they were sold.

Here’s how an ICO works: a company, usually a startup or new business venture, seeks to raise capital for its operations by holding a funding round in which investors pledge their money to the enterprise in exchange for a new coin – the “official” coin of the company they’re funding. This coin, in exchange for their monies, will grant them access to the company’s goods and services.

There’s always a chance that the currency will turn into something major, like bitcoin or Ethereum. Unfortunately, much of the time, there’s very little backing up the company’s new coin, which means ICOs are considered among the biggest gambles that investors can make, and with so many turning out to be fraudulent or phony, that insight goes double in most cases.

Naturally, Kik is fighting the decision made by the SEC, claiming that its tokens have not violated any “investor protection laws.” It also says that tokens should not be viewed in the same manner as one would view traditional stocks or bonds. Kik founder and CEO Ted Livingston explains in a statement:

This is the first time that we’re finally on a path to getting the clarity we so desperately need as an industry to be able to continue to innovate and build.

Innovation Doesn’t Give You a Way Out

Unfortunately, the SEC doesn’t see innovation as an excuse for avoiding or not playing by the rules. SEC Chairman Jay Clayton firmly states:

If it’s a security, we’re regulating it… We are not going to do any violence to the traditional definition of a security that has worked for a long time. We’ve been doing this a long time. There’s no need to change the definition.

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