The 2017 launch of the Kin cryptocurrency broke federal securities laws, a federal judge has ruled. Federal law requires anyone who offers a new security to the general public to register with the Securities and Exchange Commission. The messaging app maker Kik didn’t do that when it sold $100 million worth of Kin in 2017.
The company argued that Kin was legally a new virtual currency, not a security. In a Wednesday ruling, Judge Alvin Hellerstein rejected that claim. The ruling could have big consequences for the cryptocurrency world.
Since 2016, hundreds of cryptocurrency projects have held Kin-like “initial coin offerings” that raised millions—in a few cases hundreds of millions—of dollars. Few of these offerings went through the traditional steps required to register a securities offering with the SEC. So Wednesday’s ruling could create legal headaches for existing blockchain projects launched via an ICO. It also limits the options for launching cryptocurrencies in the future.