The three elements of the Howey test include 1) an investment of money, 2) in a common enterprise, 3) with profits to be derived solely from other efforts of others, according to the judge.
Additionally, Judge Hellerstein wrote, “Kik concedes that its issuance of Kin through the TDE involved an investment of money by which participants purchased or acquired Ether and exchanged Ether for Kin. Thus, the parties agree that the first element of the Howey test is satisfied. The parties dispute whether the second and third elements are satisfied. I hold that that they are.”
Judge Hellerstein noted that Kik established a common enterprise by depositing funds into a single bank account, and using the funds for its operations such as developing the digital ecosystem it promoted to investors.
Furthermore, he stressed that “Kik recognized and repeatedly emphasized…investors reaped their profits in the form of increased value of Kin.”
Kik plans to appeal the court’s ruling
In a statement, KIK CEO Ted Livinstong expressed his disappointment with the court’s decision. He also stated that they considering filing an appeal. He reiterated their argument that “the public sale of Kin was that of a functional currency and not a sale of securities.”
