The 2019 season of The Great Blockchain Reality Show has barely started, and the writers are already pulling out the stops; on Monday, the man behind one of the biggest crypto sales of the 2017 bubble declared that he would “fight back” against the U.S. Securities and Exchange Commission. The outcome of the battle could move us much closer to answering one of the most important questions in the realm: whether it’s possible for a company to issue a cryptocurrency that’s not subject to the strict rules governing securities.

The SEC’s opponent in this epochal showdown is Ted Livingston, CEO of popular messaging app Kik. Kik pre-sold a cryptocurrency called Kin in 2017, raising $100 million in an Initial Coin Offering, or ICO. In a blog post Sunday, Livingston revealed that the SEC is poised to bring action against Kik for securities law violation—and that Kik plans to fight classification of the Kin cryptocurrency as a security. Though Livingston doesn’t explicitly declare that Kik would take the SEC to court, there’s a strong implication.

Whether or not things go all the way to court, it’s a landmark moment. “This is the first time we’re seeing a major ICO announce that the SEC has told them that they’re going to face an enforcement action,” says lawyer David Silver, “and that company is not going to capitulate, and will fight the coming enforcement action.” Silver has brought a number of fraud cases against ICOs on behalf of investors. Though he admits he already firmly believes that ICOs legally qualify as securities, his work gives him significant insight into the nuances of the situation.

Kik’s decision to fight is a stark contrast to two ICO-funded projects, Paragon and Airfox, that acquiesced to similar SEC pressure last November. The projects reached settlements that involved financial penalties, compensation for investors, and registration of their tokens as securities. Notably, both Paragon and Airfox had proposed using their tokens as currency within their respective ecosystems, much as Kik wants to do with Kin.

SEC Chairman Jay Clayton, meanwhile, has said he believes nearly all ICOs to be securities. Until Livingston’s declaration that he’ll fight back, there was a widespread sense that the next two to three years could be blockchain’s Long March—a cold stretch of retreat and retrenchment as regulators moved against one project after another. Silver believes that will probably still happen, and in fact that moving against Kik could ultimately make it easier for the SEC to win major judgments against other projects. But if Kik follows through on its threat to go to court, even a loss could help clarify rules that, as the company argues in its 40-page rebuttal of the SEC, have been left too vague for blockchain projects to reliably navigate. As Morgan Creek Digital investment manager Anthony Pompliano wrote yesterday, “You get the sense that [Kik] are fighting these potential charges as a way to say ‘enough is enough’ for the entire industry.”

Livingston and Kik are arguing, at least so far, that Kin is a currency, and therefore can’t be a security. That’s in part on the basis of the 1934 Securities Exchange Act, which created the SEC, and explicitly excludes currencies from securities regulation. If Kik’s argument succeeded in front of a judge, the impact would be absolutely massive, creating real limits to the SEC’s ability to regulate digital tokens determined to be currencies, even if they’re privately issued, and even if they can be traded speculatively.

Even if you watched with horror as a wave of scammy ICOs stole billions of dollars from credulous investors in 2017, there are some real reasons to root for Kik. The company has at least made all the right noises about user data privacy and decentralization, and it seems genuinely plausible that something like the Kin currency could help reform our current media hellscape.

As an independent company unwilling to sell user data, Kik seems to have had a hard time generating revenue. Scale is as much a problem as ethics: Though it’s a “unicorn” valued at over $1 billion as of 2015 (and apparently the only unicorn in Canada), Kin still says it’s not big enough to compete directly with what its execs refer to as a Facebook-Google “duopoly.” So Kik struck on a crypto-based alternative strategy. Under their plan, advertisers would be able to reward users with “Kin” tokens for taking surveys or otherwise engaging. Kik would sell the tokens to generate revenue. In its response to the SEC warning, Kik recounts that it successfully tested such a system, then called Kik Points, from 2014 to 2016.

But the company claims partners were wary of buying Points from Kik because the system was centralized under Kik’s control. Kik claims that response drove it to create Kin as a cryptocurrency, theoretically guaranteeing that Kik itself can’t interfere with holdings or print unlimited tokens. Another key element of their argument to the SEC is that the Kin currency is no longer simply a part of Kik, but an open ecosystem. In December, the project announced that 30 different apps were using Kin in some way.

All of this, it should be emphasized, might be strategic window-dressing to pretty up Kik’s $100 million ICO windfall. But it at least sounds like the kind of Web 3.0 system many blockchain advocates want to build. And securities regulation, with its attendant monitoring requirements, could make that emergent alternative to Facebook-style panopticism much more unwieldy—especially since many of Kik’s users are teenagers.

Silver thinks that examination would paint a clear picture that Kin was promoted as a speculative investment: “Everyone trying to wink and nod is being disingenuous.”

But simply declaring that Kin is a currency is far from a slam-dunk defense. For one, according to Silver, a court case would mean all of Kik’s communications about the currency could be scrutinized for promises that it would increase in value. And, says Silver, that’s “not just limited to what the lawyers wrote. All their chat rooms and text messages” could be examined. Silver thinks that examination would paint a clear picture that Kin was promoted as a speculative investment: “Everyone trying to wink and nod is being disingenuous.”

Some ICO buyers, moreover, seem quite inarguably to have gotten involved out of the potential for profit. Of the $100 million raised for Kin, $50 million came in private funding from investment firms including Polychain Capital and Blockchain Capital. It seems unlikely that they’re hoarding Kin so they can use minigames to sell tweens on the wonders of speculative capitalism.

Existing work to develop the “Kin ecosystem,” such as an API that would help developers integrate Kin into games, could also be a barrier to Kik’s argument. That’s because a security is partly defined as something expected to gain value based on work by its promoter—part of the now-infamous Howey test. Work, like the game API, has been done by the Kin Foundation, not Kik itself. But Silver suggests that distinction is a fig leaf: “People will quibble with me, they’ll say the Foundation is separate, I’ll say it’s not.” A judge won’t necessarily take the separation at face value either.

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For similar reasons, Silver says the distribution of Kin tokens will be very relevant to Kik’s fight. The $100 million raised in the 2017 token sale accounted for only 10 percent of the Kin tokens created, with another 60 percent allotted to the Kin Foundation and 30 percent to Kik itself. That could have major implications for any court case because it implies an expectation of rising value, though Kik might argue it retained stocks of the token only to satisfy future demand from advertisers or other third-party users.

There is one crucial way in which Kin differs from other ICOs: the fact that the Kik platform was already operational when it happened. Silver doesn’t believe Kik would likely win a court battle, and despite the bluster, expects the company will settle with the SEC. But because it already had an existing product, Silver says the SEC is unlikely to dismantle even the Kin system, much less Kik itself. Instead, regulators may aim for a result that compensates investors while devaluing the Kin token, perhaps by distributing the share Kik and the Kin Foundation are holding.

If that sort of result emerges from either a settlement or court case, Silver predicts it would leave the door open for much more drastic action against other fundraisers. “A settlement between the SEC and Kik,” he says, “could hinge on the fact that Kik had a pre-existing network, whereas other ICOs—which I view in the same context as the Token Distribution Event—did not. The SEC could use that distinction and go even more strongly against ICOs that did not have a pre-existing network as being per se violators of securities law. That might be why Kik’s investigation is first and in front of others.”

Those stronger SEC actions could include root-and-branch dismantling of some ICO-funded projects. “I do believe there are one or two [projects] that are going to be destroyed hands down,” says Silver, “and should be.”

It’s worth noting that Kik’s legal counsel in the SEC fight, the major international firm Cooley LLP, has more than usual stakes on the line itself. Cooley lawyers played a leading role in developing a legal structure called SAFT, or Simple Agreement for Future Tokens, arguing that it helped mitigate some of the regulatory risk of selling speculative cryptocurrencies. Many other legal authorities have been skeptical of the SAFT framework, but Kin nonetheless used SAFT for part of its sale. A negative outcome in the Kin case, then, could harm Cooley’s reputation.

To be clear, the SEC hasn’t formally declared it will move against Kik, but that could happen soon. And if Kik takes its case to court and fails, it would undeniably be a short-term blow to many crypto projects. A formal judgment (though likely to be worked over through appeals) would lay to rest the remarkably persistent idea that cryptocurrency is in one way or another immune to regulation. The prospect of widespread clawbacks and strangled development could crash token markets still further.

But in the medium to long term, there would also be a clear upside: Even a failure would finally provide regulatory clarity for future blockchain developers. Once that clarity exists, it will be easier in some ways to build the systems blockchain supporters want to see come to fruition. A negative judgment could even push crypto development in a more positive orientation, one less driven by accruing huge investment war chests, and more by building things people actually want to use.