fil securities

SEC Alert! Filecoin in the Crosshairs: Could FIL Tokens Be Considered Securities?

  • SEC warns Grayscale about classifying Filecoin (FIL) as securities.
  • Withdrawal of Form 10 application: Grayscale urged to withdraw the application that would make the Filecoin Trust an entity that reports quarterly results.
  • Howey’s test and Grayscale’s response: Filecoin Trust fights SEC decision and prepares to argue its position.

The United States Securities and Exchange Commission (SEC) has intervened in the Filecoin (FIL) case and has issued a warning to Grayscale, the cryptocurrency manager, noting that these tokens could be considered securities. This is the latest in a series of disputes involving cryptocurrency-related companies.

In response to the SEC warning, Grayscale, a subsidiary of Digital Currency Group (DCG), has been asked to withdraw its Form 10 application for the Filecoin Trust. Said request was aimed at turning Filecoin Trust into an entity that reports quarterly results, similar to publicly traded companies.

The SEC’s View on Filecoin Trust

The SEC considers Filecoin Trust to be an investment firm and has recommended that Grayscale register as an investment vehicle under the Investment Company Act of 1940. However, such registration could limit Filecoin Trust’s ability to issue values and may impose other restrictions.

To be classified as an investment firm, the Filecoin Trust must pass the Howey test, which determines whether a transaction can be considered an investment contract and therefore a security. This test involves evaluating whether the transaction is an investment of money in a common enterprise, with the expectation of earning a profit through the efforts of others.

Since FIL is legitimately used as a payment method for Filecoin data storage services, it may not meet the criteria of Howey’s test.

Grayscale’s answer and possible resolution

Grayscale has decided to challenge the SEC’s decision and will file a legal explanation of its position. Although they cannot predict the outcome, they are willing to comply with the regulations if they fail to convince the regulator.

Ultimately, it might be necessary for Grayscale to allow the Filecoin Trust to register under the Investment Company Act 1940 or, alternatively, to seek the dissolution of the Filecoin Trust.

Impact on the price of FIL

News of the SEC’s regulatory intervention regarding FIL caused a brief decline in the token’s price. However, according to Coinmarketcap, the price of the token has since recovered and is trading around $4.60 as of this writing.

Disclaimer: The content and links provided in this article are for informational purposes only. islaBit does not offer legal, financial or investment recommendations or advice, nor is it a substitute for the due diligence of each interested party. islaBit does not endorse any investment or similar offer promoted here. Some of the postings may be promoted by interested third parties.

Leave a Comment