Concludes that Kin Tokens are not inherently securities
Horizons Law, a U.S.-based law firm specializing in blockchain and cryptocurrency projects, has issued an independent legal opinion for the Kin Foundation addressing whether transactions involving the Kin Tokens are securities transactions under the U.S. Securities and Exchange Acts of 1933 and 1934 (the “Acts”), and subsequent enforcement actions and guidance released by the U.S. Securities Exchange Commission (the “SEC”).
The opinion starts by reviewing the US Securities Laws applicability to crypto tokens, summarizes the implications of the Kik-SEC settlement for Kin, analyzes the Howey Test as it pertains to Kin, contrasts learnings from the Telegram and EOS cases, assesses Kin’s evolution against Commissioner Peirce’s 2.0 Safe Harbour, and further expands on the existing decentralization factors inherent to the Kin Ecosystem, as of June 14th 2021.
The project was led by Ryón Nixon, Founding Partner, Horizons Law — a legal expert in the field.
For background, the SEC pursued an enforcement action against Kik Interactive Inc. relating to its 2017 token sale. Subsequently, a Settlement was reached in October 2020 and brought finality to the case. More specifically, that Settlement did not conclude that the Kin Token was a security nor required registration of Kin Tokens under the 1934 Act. Rather, the Settlement only addressed: (1) purchases made by investors pursuant to a Simple Agreement for Future Tokens (“SAFT”) made before the Kin Tokens were distributed, and (2) sales of Kin Tokens to members of the public upon the Kin Tokens’ distribution in 2017 (the “Token Distribution Event”).
Pursuant to extensive research and analysis conducted over the past three months, Horizons Law’s opinion is that, transactions related to Kin Tokens currently are not inherently “securities” transactions under the Securities Act of 1933, Securities Exchange Act of 1934, and subsequent guidance issued by the SEC or other relevant authorities.
Specifically, Horizons Law reached their conclusions because, to-date, they believe that Kin Tokens are managed by, and are used to facilitate, a functional, decentralized platform with a number of various constituents, among other factors. Though Kik may have been viewed as an Active Participant of the Kin Ecosystem as its creator and issuer, it no longer plays a role in the Kin Ecosystem, nor provides managerial services that could reasonably be expected to drive profits for Kin Token holders.
Based on the review, Kin’s current form indicates that the token is not an investment contract sufficient for treatment as a security under the Securities Laws. In-app purchases of Kin are likely driven by consumptive purposes – specifically, to access digital services.
The 23-page legal opinion has been delivered to the Kin Foundation, and can only be made available strictly upon request to approved parties that require a legal opinion to meet their compliance obligations, such as specifically exchange/marketplace related services where Kin is traded.
Kin is uniting apps and services of all sizes and varieties to build a new digital economy that aligns the incentives of developers, users, and communities. By growing together, the Kin Ecosystem can build a more fair digital world, where those who create value share in the success of the network. If you are interested in building your app with Kin, we invite you to join us.