Kik Interactive Inc. has finally settled the lawsuit filed against it by U.S. Securities and Exchange Commission over its 2017 Kin initial coin offering as a court signed off on a deal.

Under the settlement announced Wednesday, approved by Judge Alvin Kellerstein of the U.S. District Court for the Southern District of New York, Kik is “permanently restrained and enjoined” from violating Section 5 of the Securities Act. Under the terms, Kik is to pay a penalty of $5 million to the SEC within 30 days of the final judgment along with agreeing to give the SEC 45 days notice before it sells or issues any cryptocurrency, digital tokens or any assets issued using distributed ledger technology over the next three years.

The lawsuit from the SEC was filed in June 2019 and alleged that the ICO offered by Kik in 2017 was illegal because the company sold tokens to U.S. investors without registering the offer and sale as required by U.S. security laws. Kik raised $98 million in the ICO in 2017, including $50 million in presales for Kin, an Ethereum blockchain-based cryptocurrency that was pitched both as allowing the company to expand Kik’s features and supporting developers with an open app ecosystem.

Kik argued that the ICO was for a currency and hence was not subject to securities law, but the judge disagreed. He ruled in September that the SEC was correct in its lawsuit that the ICO should have been registered under securities law. Although the judge noted that there was little direct precedent for the case, the decision was made using the Howey test created by the Supreme Court in 1946 to ascertain whether certain transactions qualify as investment contracts under the Securities and Exchange Act of 1934.

“Issuers seeking to use the public markets to capitalize their businesses may not evade the registration requirements of the federal securities laws,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement following the settlement. “The court’s decision recognized that Kik was engaged in a single, illegal offering of securities.”

While still disagreeing with the ruling, Kik is happy to put the matter behind it. “Although we respectfully disagree with Judge Hellerstein’s analysis in his ruling and were prepared to pursue an appeal, the SEC offered settlement terms that allow us to put this behind us and focus on our mission,” the company said. “We look forward to an exciting future for the Kin Ecosystem and the millions of mainstream consumers who earn and spend Kin every month.”

Image: Kik