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Chat app Kik yesterday helped launch a legal battle that could result in greater clarity around whether digital tokens are currencies or securities.

Backstory: Kik in 2017 raised nearly $100 million in an initial coin offering for a token called Kin that would be used to buy and sell digital services. The SEC later reached out for more info and eventually sent Kik a Wells notice that indicates some sort of enforcement action will be forthcoming.

  • In short, Kik wants Kin to be viewed as a currency rather than a security. But, as Kik investor Fred Wilson notes, "the SEC is regulating by enforcement, not new rulemaking."
  • SEC officials previously declared both Bitcoin and Ether to be currencies, although its corp finance director did hint that the initial sale of Ether tokens should likely have been considered securities.

Kik's top argument is that Kin doesn't meet the Howey Test, which was created by the Supreme Court in 1946 to determine if certain transactions (like an ICO) are investment contracts (and, thus securities).

  • It's no slam dunk. Kik argues in its Wells notice response that Kin buyers had no expectations of profits from buying tokens, thus not meeting the Howey Test, but 2017 comments by Kik CEO Ted Livingston tell a different story.

Yesterday Kik launched a crowdfunding effort to take its fight to court, contributing an initial $5 million worth of digital tokens.

  • The crypto industry hope is that judges will decide this currency vs. security questions once and for all, effectively creating an updated Howey Test.
  • And it should be the SEC's hope as well, to both save it headaches and to establish common rules of the digital road.

The bottom line: Kik and other crypto-related startups aren't trying to operate outside of regulatory regimes, despite their industry's lawless reputation. They want specific rules. But, so far, the U.S. government hasn't complied.

Go deeper: The promise of Facebook's GlobalCoin

Go deeper

2 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.

2 hours ago - World

France recalls ambassadors from U.S. and Australia over submarine deal

Secretary of State Antony Blinken (L), French Foreign Minister Jean-Yves Le Drian (C), and French ambassador to the U.S. Philippe Etienne. Photo: Nicholas Kamm/AFP via Getty Images

France has taken the extraordinary step of recalling its ambassadors to the U.S. and Australia after both countries blindsided their French allies with a new military pact and submarine contract, the French Foreign Ministry announced on Friday.

The backstory: While sealing an agreement with the U.S. and U.K. to acquire nuclear submarines, Australia ripped up an existing $90 billion submarine deal with France. That led senior French officials to accuse the U.S. of a "stab in the back."

Updated 2 hours ago - World

In reversal, Pentagon now says drone strike killed 10 Afghan civilians

Caskets for the dead are carried towards the gravesite as relatives and friends attend a mass funeral for members of a family that is said to have been killed in a U.S. drone airstrike, in Kabul on Aug. 30. Photo: Marcus Yam/Los Angeles Times via Getty Images

A U.S. drone strike launched on Aug. 29 killed 10 civilians in Afghanistan, including seven children, rather than the Islamic State extremists the Biden administration claimed it targeted, the Pentagon said Friday.

Why it matters: U.S. Central Command said at the time that officials "know" the drone strike "disrupted an imminent ISIS-K threat" to Kabul's airport, and that they were "confident we successfully hit the target."