SEC Staff Suggests Filecoin (FIL) Is a Security: Grayscale Responds

• Grayscale disagrees with the US Securities and Exchange Commission (SEC) staff suggestions that Filecoin (FIL) is a security.
• The SEC believes the Grayscale® Filecoin Trust (FIL) meets the definition of an investment company under the Investment Company Act of 1940.
• Grayscale intends to respond promptly to the SEC staff with an explanation of its legal basis for believing FIL is not a security.

SEC Suggests Filecoin (FIL) is a Security

The US Securities and Exchange Commission (SEC) has sent a letter to Grayscale suggesting that Filecoin (FIL), the native token of the Filecoin cryptocurrency ecosystem, “meets the definition of a security” and also “meets the definition of an investment company under the Investment Company Act of 1940.” Grayscale disagreed with this assessment and intends to respond promptly to explain why it believes FIL is not a security.

Grayscale Disagrees With SEC

Grayscale received comment from SEC staff regarding its application to list its Grayscale® Filecoin Trust (FIL). In particular, they suggested that FIL meets the definition of a security as well as an investment company under federal securities laws. In response, Grayscale said it does not believe that FIL is a security and plans on responding promptly with an explanation for their position.

Consequences Of Being A Security

If SEC staff do not agree with Grayscale’s position, then other accommodations may need to be taken in order for them to register their trust. This could include dissolving or withdrawing registration from their trust altogether. This would be similar to what happened back in 2022 when Grayscale filed a lawsuit against the SEC after they denied their application for exchange-traded fund status for their Bitcoin Trust (GBTC).

Previous Lawsuits Against The SEC

In 2022, Grayscales applied for exchange-traded fund status for their Bitcoin Trust but was denied by the SEC which caused them to file a lawsuit against them in response. They were ultimately unsuccessful in receiving ETF status but have now shifted focus onto registering their FileCoin Trust instead.

Conclusion

It remains unclear whether or not SEC staff will agree that FileCoin is not considered as security under federal securities laws though it appears that if communication fails between both parties then other options such as withdrawal or dissolution may be required in order for registration process completion.