The Real Answer is to Update Securities Regulations

In the first case, while investors lost money, it is unclear that Kik misled them about the potential for the Kin token to be used or about its fundamental value proposition.

In the Kik case, they issued a token that, based on the letter of the law, might well be a security, but they did not follow securities laws when selling the token.

Purchasers of the Kin token also lost a lot of money, but most of that loss is related to the collapse of the token market at large, rather than issues with the token itself.

Securities laws provide help in that regard in cases where the representations made by the issuer deviate from what is required, and those representations are material to the investment decision.

If tokens issued by corporate entities are to be deemed securities, required disclosures should be updated.

Current required financial disclosures are wholly inadequate to provide investors context for the value of tokens being used by emerging companies for financing.

In this case, for example, it is unclear that Kik's disclosures of the prospects of their token were problematic, but it is very clear that the required disclosures for securities, had they been followed, would have shed little to no light on the investment prospects for the token.

Securities disclosures pertain exclusively to the issuer and their finances rather than clarifying the likelihood that the token being issued would gain acceptance.

Kik's company finances would have provided limited information to the central question that Kin token holders needed to know: whether or not Kin would become highly used, either in their own network or on others.

If U.S. regulators were to take action, a good start might be to create a subclass of securities for utility tokens issued to fund "For profit" enterprises.