Yesterday, news surfaced that the US Securities and Exchange Commission (SEC) sued the messaging app, Kik for failing to register what the regulators say was a $100 million securities offering. The Commission has claimed that the app had pushed the token sale as a speculative investment and had started a ‘pivot’ to the cryptocurrency as a pretext to “salvage its ailing business.”

Kik has now set up a $5 million fundraiser to support its legal fight against the commission and has even issued its response.

In a press release, Kiks General Counsel Eileen Lyon said that the commission's complaint was based on a ‘flawed legal theory’ that relies on an incorrect understanding of securities laws. The SEC claims that Kik executives had internally characterised the token, dubbed as ‘Kin’, as a vehicle for speculative gains, qualifying it as a security.

Lyon wrote:

“The complaint assumes, incorrectly, that any discussion of a potential increase in value of an asset is the same as offering or promising profits solely from the efforts of another; that having aligned incentives is the same as creating a ‘common enterprise’; and that any contributions by a seller or promoter are necessarily the ‘essential’ managerial or entrepreneurial efforts required to create an investment contract.”

She added:

“These legal assumptions stretch the Howey test well beyond its definition, and we do not believe they will withstand judicial scrutiny.”

She argued that the SEC was aware “that the transactions currently taking place within the Kin Ecosystem do not fall under the federal securities laws.”

The CEO of the messaging app Ted Livingston, described the SEC’s complaint as incomplete, saying that it presents “grossly misleading picture of the facts and circumstances surrounding our 2017 pre-sale and token distribution event.”

Livingston added: