Kik and the SEC: What’s Going On and What Does It Mean for Crypto? - Andreessen Horowitz

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Kathryn Haun
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Kik, the Tencent-backed messaging app, raised $150 million in August 2017 in an initial coin offering (ICO). Weeks before that, the SEC issued guidance that ICOs may constitute illegal securities offerings, so it was no surprise to learn Kik was among the wave of subpoenas the SEC sent to crypto proj...

Kik, the Tencent-backed messaging app, raised $150 million in August 2017 in an initial coin offering (ICO). Weeks before that, the SEC issued guidance that ICOs may constitute illegal securities offerings, so it was no surprise to learn Kik was among the wave of subpoenas the SEC sent to crypto projects last year. But last November, the SEC upped the stakes when it notified Kik it was thinking of pursuing an enforcement action for violating U.S. securities laws. Why does this matter, and what might it tell us about how far regulators are willing to stretch existing law to reach crypto projects?

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Given how little accessible and accurate information is out there about how regulatory agencies actually work, we share some thoughts on how SEC investigations happen (across all industries, not just crypto); how network usage may impact whether a cryptocurrency is deemed a security; and what the industry might expect next. The arguments of recent cases are interesting, because they are representative of how the entire industry is dealing with an emerging technology where it’s still unclear which regulations will apply and how.

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