SEC staff suggest Filecoin (FIL) is a security: Grayscale

SEC staff suggest Filecoin (FIL) is a security: Grayscale

By Benson Toti - min read
  • Grayscale says it disagrees with SEC’s staff over suggestions that Filecoin (FIL) is a security.
  • The letter from the SEC staff was sent on 16 May 2023, after Grayscale applied to list the Grayscale® Filecoin Trust (FIL) (OTCQB: FILG) 
  • SEC staff also believe the meet the Grayscale® Filecoin Trust “meets the definition of an investment company under the Investment Company Act of 1940.”

Grayscale says it received comment from the US Securities and Exchange Commission (SEC) staff regarding the underlying asset of the Grayscale® Filecoin Trust (FIL) (OTCQB: FILG) that the digital asset manager was looking to register.

In particular, Grayscale’s press release points to a letter from SEC staff sent on 16 May. According to the staff, FIL, the native token of the Filecoin cryptocurrency ecosystem, “meets the definition of a security.” 

The SEC comment highlighted that this view was taken with an understanding the securities laws.

Grayscale disagrees with SEC’s letter that FIL is a security

The Filecoin Trust appears to also “meet the definition of an investment company under the Investment Company Act of 1940,” the letter stated.  The staff therefore requested that Grayscale seeks the withdrawal of the registration of the FILG that it had applied for in April.

Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position,” Grayscale said in its press release on Wednesday.

According to Grayscale, it’s difficult to tell whether the US regulator’s staff will agree with it in terms of the assessment that Filecoin is not a security. The company says if their communication fails to persuade the SEC, it may have to seek accommodations in the quest to register the Filecoin Trust.

The company could also go the recommended way and have the Trust dissolved, the statement read.

Grayscale filed a lawsuit against the SEC in 2022 after the agency denied the company’s application to convert its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF).

The SEC on the other hand sued Ripple, the company behind the XRP cryptocurrency over allegations the blockchain firm had been selling unregistered securities. That case has dragged since December 2020, although its conclusion looks to be imminent.

Elsewhere, the agency has been criticized for its approach to crypto regulation, particularly with regard to its regulation by enforcement as seen over the past several months.