A US district judge for the Southern District of New York has agreed with the Securities and Exchange Commission’s assessment that Kik’s $100 million initial coin offering (ICO) in 2017 was a securities sale. Judge Alvin Hellerstein has granted SEC’s motion for summary judgment, ruling that Kik violated the Securities Act when it sold its tokens called “Kin” without the blessing of the SEC.

The commission considers tokens as securities and requires their sale to be registered. It has gone after other companies that held ICOs in the past, including Telegram, which was ordered to return over $1.2 billion to investors and to pay an $18.5 million civil penalty. The SEC also fined blockchain technology company Block.one $24 million for running an unregistered ICO.

In the ruling (PDF), the judge explained that courts rely on the three elements of the Howey test to determine what constitutes a securities sale. According to the Howey test, something is a securities sale if it’s an investment of money, in a common enterprise and has expectations of profits to be derived solely from the efforts of others. The judge wrote:

“Kik concedes that its issuance of Kin through the Token Distribution Event (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.”

With regards to the second element, he said that Kik established a common enterprise when it deposited its investors’ money in a single bank account. Further, he said that Kik extolled Kin’s profit-making potential in public statements and at public events, describing how investors can earn in a way that satisfies the third