In a bid to survive an SEC lawsuit centered on the 2017 Kin token offering, Kik CEO Ted Livingston wrote on Monday, September 23, that the company was pulling the plug on its eponymous messenger app. Not just that. He also said it was downsizing to just 19 people.

Industry reaction has been fast and furious. The big question is: Should ICO-funded crypto startups be worried? And, if so, who?

Marc Boiron, a partner at FisherBroyles, specializes in both blockchain and securities law. He told Decrypt, "Kik's downfall makes it clear that the risks associated with an ICO are significant enough to threaten the existence of a business. An existing ICO should objectively look at its situation and seek advice from legal counsel."

The upshot of that, he said, may be paying a penalty and returning funds. "In the end, this means that most ICO-funded startups, especially those who did their ICOs when crypto prices were at all-time highs, are likely to shut down similar to Kik."

Olta Andoni, head of blockchain practice at Ziliak Law, LLC, agrees that the news is not great for other ICOs. "Considering the fact that Kik Interactive was one of the first major tech companies in the world to hold an ICO and raise about $100 million, of course, this will not be a nice message to all other ICOs," she told Decrypt. 

Andoni suspects, however, that Kik's recent moves—including the decision to push Kin—are part of a larger legal strategy geared toward fighting this specific lawsuit, though it's unclear what exactly that strategy might be. Moreover, it might sound strange for a company whose token is being labelled a security to say it is pushing broader use of its token even as it removes its primary utility: integration on Kik Messenger.

Boiron isn't so sure it matters. "The SEC's case is not against Kin in its current state, and the SEC's view of Kin in its current state is unclear,” he said. ‘Rather, the SEC's case is for the sale of Kin in 2017. Therefore, nothing will change in the SEC's current case with respect to the veracity of its claims—it will continue to pursue its claims that Section 5 of the Securities Act was violated."

Regardless of legal strategy, it's impossible to make sweeping statements about token sales when many variables are involved. For instance, could Ethereum be targeted by the SEC?

"Strictly as a legal matter, there is no difference between the 2014 Ethereum crowdsale and an ICO-funded startup," said Boiron. "However, the SEC has decided to treat them differently based on the lack of clarity regarding the securities laws as applied to Ethereum's crowdsale in 2014 relative to the clarity the SEC believes it creates with the DAO Report in mid-2017."

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For Angus Champion de Crespigny, former Blockchain Strategy Leader for Financial Services at EY, there's more than legal considerations involved—there's something more existential. The regulations implied for crypto assets necessarily remove decentralization, a key selling point of blockchain tech, he said.

"Regulation is a significant percentage of the cost of issuing and financial instrument, and once you do that properly, you're centralized by the regulators." In which case, what's the point of using a "very heavy technology and introducing a lot of risk" when you could use a bank or even PayPal?

And if Kik is serious about increasing usage of its coin, Champion de Crespigny has his doubts about most forms of cryptocurrency: "People will flock to the most accessible, reliable money. So if you're looking to create your own digital money, why would anyone use that versus Bitcoin or something more liquid?"