Last week the Canadian social media company Kik---and an array of prominent backers in the crypto world---launched a $5 million campaign to fund an impending legal battle with the Securities and Exchange Commission. CEO Ted Livingston said the fight, which centers on Kik’s $100 million initial coin offering in 2017, was worth funding because it could have wide implications for blockchain startups, many of which used ICOs to fund their fledgling ventures. He said he welcomed a court battle that would allow judges to carve out more favorable regulations for digital tokens.

Gregory Barber covers cryptocurrency, blockchain, and artificial intelligence for WIRED.

On Tuesday, the SEC rang the bell for the first round of the fight, filing a civil complaint alleging that Kik’s ICO was an illegal sale of securities.

In its complaint, the SEC alleges Kik marketed its token, known as kin, as an investment opportunity, emphasizing potential returns to early buyers. It says Kik described the token as a “Hail Mary” pass to keep the company afloat as it ran short on venture capital in early 2017. The intent, the SEC alleges, was to use proceeds from the ICO to fund Kik’s operations while building out a new “speculative venture” that involved an ecosystem of apps that used kin. “Kik told investors they could expect profits from its effort to create a digital ecosystem,” Robert Cohen, chief of the Enforcement Division’s Cyber Unit, said in a statement.

Kik has been unusually vocal in its dispute with the SEC. In January it went public with its plans to fight any legal action, arguing that its kin tokens were intended to be used on its platform and thus weren’t an investment. In May it said that 300,000 people were using kin across its network of apps each month to buy stickers, get paid for taking surveys, and other tasks. The SEC’s complaint, however, attempts to turn Kik’s argument on its head, alleging that Kik framed new ways of using the token to boost its value.

The case will likely turn on kin’s status as a currency or investment, says Benjamin Sauter, an attorney for Kobre and Kim who regularly represents blockchain companies. “An interesting question for both sides is whether you actually want this decided by a judge or a jury,” he says.

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Some in the cryptocurrency world have taken a firm stance on that question, arguing that a civil lawsuit could force a change in the way the SEC regulates cryptocurrencies. Kik is hoping the courts will produce a new legal test specific to digital tokens that would determine their place in securities law. Backers of its legal defense fund, dubbed Defend Crypto, include venture capitalist Fred Wilson, a Kik investor, and exchange operator Circle, who argue the SEC’s approach to regulating tokens is a drag on innovation and an undue drain on company resources.

The SEC could have backed down in response to Kik’s public campaign, either working toward a settlement or issuing a no-action letter that wouldn’t be binding on other companies. But the lawsuit indicates an aggressive stance on ICOs by the SEC, which has suggested that all tokens used for that purpose are securities and thus subject to strict investment rules. It has pursued few companies in court for securities violations so far. Instead, it has engaged in what Livingston describes as a “divide and conquer” tactic, negotiating over long periods with individual companies who are eventually pushed to settle.

“This is the first time that we’re finally on a path to getting the clarity we so desperately need as an industry to be able to continue to innovate and build,” Livingston said in a statement. The company added that it was still reviewing the complaint. The SEC is demanding that Kik pay a penalty and return its ICO proceeds to buyers.

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