To most crypto projects, receiving a letter from the Securities and Exchange Commission (SEC) stating that they have opened legal proceedings would be the worst imaginable scenario. Kik CEO and Kin Foundation founder Ted Livingston however would like nothing more, such is his desire to reshape the laws that currently govern all securities in the U.S, including cryptocurrencies.
Livingston and Patrick Gibbs, partner at Californian law firm Cooley, have established DefendCrypto.org, a fund designed to help pay for legal costs as Livingston seeks a date with the SEC in a desperate attempt to achieve the legal clarity the absence of which he says is stifling innovation.
On Unchained, Ted Livingston of @Kik and @kin_foundation, and Patrick Gibbs of Cooley, announce the formation of the $5 million https://t.co/tHE8Wzdjyi fund to fight the SEC in court, hopefully resulting in a new Howey test for crypto tokens. https://t.co/b8ge41y0nQ
— Laura Shin (@laurashin) 28 May 2019
New Howey Test is Needed
Speaking on the Unchained podcast, Livingston recounts his own interactions with the SEC in setting up the Kin cryptocurrency, and it’s clear that these personal interactions have been the driving force behind the unusual move. In the podcast he states how the SEC began to communicate with him just three days after the Kin token sale regarding its potential status as a security, which led to “some comments and some meetings and then some subpoenas and then formal testimony”, with the whole process taking up 18 months of his time and $5 million in funds with no clear result. This led to Livingston realizing that the current Howey test is not fit for purpose in relation to digital assets, and he is very clear that there is only one way it can be amended:
We need a new Howey test and that new Howey test is going to come from a ruling in a court case.
DefendCrypto.org Opens its Doors for Donations
In order to make sure he has the best chance possible, Livingston started DefendCrypto.org to elicit donations towards legal fees, in addition to $5 million he has himself contributed. Gibbs, who has been working with Livingston on his dealings with the SEC, states in the podcast that the wheels are in motion within the SEC for a filing to be made recommending action against Kin, the aim of which is very clear:
If the SEC files an action against Kik or the foundation we intend to fight it and litigate it and ask a court to decide whether or not the sale of KIN tokens amounts to an investor contract or security. There’s no question that this process will take some time, but in the absence of the SEC giving appropriate and clear guidance itself, this is really the only option.
Livingston’s method to obtaining clear guidance is a risky one, reflecting his passion for the space and his confidence that a resolution can be achieved by his drastic course of action.