A new round of documents have been filed in the lengthy dispute between the United States Securities and Exchange Commission, or SEC, and Kik Interactive Inc. over the messaging company’s 2017 initial coin offering, or ICO.
Both parties are seeking summary judgment, with the SEC submitting a proposed order that it hopes the court will sign.
However, Kik is confident that the judge will rule in its favor, asserting that the SEC’s argument rests heavily on construing the Telegram case as precedent.
SEC proposes summary judgment order
The SEC filed a proposed order on May 8 outlining its request for summary judgment that it hopes the court will choose to sign.
If signed, the order would find Kik guilty of violating U.S. securities laws through failing to register its public and private offerings with the SEC, invoking the three-pronged Howey test to argue that Kik’s tokens comprised securities.
On the same day, Kik filed a memorandum in support of its motion for summary judgment, rejecting the arguments posed by the SEC.
Kik rejects SEC’s motion
Firstly, Kik advances that “the SEC cannot establish two of the three requirements of the Howey test: a common enterprise and expectation of profits from the essential managerial efforts of others.”
The firm asserts that its ICO comprised two separate offerings — an exempt offering of securities to accredited investors, and a public ‘token distribution event’ that sold utility tokens — emphasizing that the token sales “involved different rights, different contractual agreements, different purchasers, and different consideration.”
The filing also argues that the SEC places extensive and misplaced reliance on the recent preliminary injunction ordered in the regulator’s suit against Telegram and precedent for the denial of Kik’s motion for summary judgment.
“Telegram involved an entirely different set of facts and circumstances, and so even the tentative conclusions reached at the preliminary injunction stage are irrelevant to this case,” the motion states.
Judge expected to rule next month
Speaking to Cryptox, a Kik representative described the documents as “the standard last step in the process.”
“The judge likely won’t rule for another 4-6 weeks,” the representative added.
Kik’s General Counsel, Eileen Lyon, told Cryptox that the SEC’s argument “relies heavily on the recent Telegram case which we think was poorly reasoned and wrongly decided.
“As you know, the Telegram case is not binding precedent, so it will be interesting to see what impact it might have, in light of the many other authorities we have cited and the significant factual differences in the two token offerings,” she added.
