September 27, 2019
On September 23, 2019, Kitchener-based Kik Interactive Inc. (Kik) announced that the company will be shutting down its messaging app to focus on its cryptocurrency, Kin. The decision comes in the wake of an ongoing lawsuit with the U.S. Securities and Exchange Commission (SEC) related to the company’s Initial Coin Offering (ICO) of Kin in 2017.
The lawsuit alleges that Kik’s sale of approximately US$100 million of its Kin tokens amounted to an illegal offering of securities. The SEC takes the position that most ICOs amount to securities offerings, which would subject cryptocurrency offerings to onerous U.S. securities law regulations. The lawsuit presents an opportunity for a U.S. court to clarify when U.S. securities laws will apply to the sale of digital coins and tokens, and could have broad implications for the cryptocurrency industry.
In a blog post, Kik founder and CEO Ted Livingston said that the lawsuit has been “a long and expensive process to drain our resources.” However, Kik will continue to fight. “This is a race to build a new global money,” said Livingston. “I would not bet that the government is going to stop that.”
Kik’s team will be reduced from over 100 people to 19 as a result of the shutdown of their messaging app. This reduction will help the company decrease its burn rate by 85%, allowing Kik to fund the SEC lawsuit. Livingston revealed that the messaging app cost the company $1 million per month to run, and the company had difficulty monetizing its relationships with its users.
The company has not announced when the messaging app will close. The app gained popularity in 2010 in part because it allows users to chat anonymously and to register without providing a phone number.
Going forward, Kik will shift its focus to attracting buyers for the Kin cryptocurrency. To achieve this goal, the company will focus on improving the Kin blockchain to support upwards of a billion consumers, improving confirmation times, increasing adoption and growth for all developers who use Kin in their apps, and creating a mobile wallet that makes it easy and exciting to buy and use Kin.
For more information on the Kik lawsuit, see the Goodmans Update “SEC Sues Canadian Company for Conducting Illegal Token Offering”.
Author: Matt McDonald