Earlier this week, the CEO of the Kik messaging app, Ted Livingston, addressed the US Securities and Exchange Commission's (SEC) upcoming decision on whether to file a suit against the company's 2017 ICO for the Kin token. Livingston's post on Medium, along with Kik's response to the SEC's Wells Notice, outlined the argument for why the Kin ICO did not violate any securities laws. Livingston was adamant that crypto will usher in the "next wave of widespread innovation" and wants to make sure the US is part of that innovation by "talking about what is happening behind the scenes."
What is happening behind the scenes? A video has been found from a 2017 San Francisco Bitcoin Meetup with Livingston talking about the potential for Kin's profits before the ICO took place.
Kik's response this week had argued that the Kin token fits the definition of a currency and therefore cannot be called a security by the SEC. Further, it highlighted that the company "did not offer or promote Kin as a passive investment opportunity. Doing so would have doomed the project." Just because the Kin token has value doesn't make it a security. Kik argued that it didn't promote Kin as an investment opportunity and therefore the token doesn't pass the Howey Test, which is used to determine if an asset class is a security based on the following criteria:
- "It is an investment of money."
- "There is an expectation of profit from the investment."
- "The investment of money is in a common enterprise."
- "Any profit comes from the efforts of a promoter or third party."
The video appears to tell a different story. In it, Livingston explains:
"If Kin were as popular as Ether is today, that 30 percent [of company-held tokens] would be worth 9 billion dollars. That's awesome. We'd give some back to [investors]. You invested $50 million, maybe we'll give you $500 million out of that $9 billion."
Furthermore, in Kik's Wells Notice response, the company argued that Kin holders "have no claims (contractual or otherwise) to assets or any future profits." But in the video, Livingston states:
"Maybe developers, the Kin they get rewarded in, they will hold on to them. Actually, that's one of the things. You can become a stakeholder, you can share in the economic upside in the creation of this ecosystem."
There are plenty more instances in which Livingston implies investors or holders could expect profit. These quotes seem to heavily contradict Livingston and Kik's claims that the SEC has no grounds to consider them a security based on the Howey Test's criteria.
This video may not necessarily doom the Kin project, but it certainly complicates the Kik/SEC storyline.