The SEC has issued a warning to Grayscale, the crypto manager of the Digital Currency Group, stating that Filecoin tokens (FIL) qualify as securities. This has prompted Grayscale to retract its Form 10 application for the Filecoin Trust, which would have required the trust to report quarterly results, similar to publicly traded companies. The SEC has asked the company to register as an investment vehicle rather than an investment company, according to a press release issued by Grayscale on May 17. To be classified as an investment company, the Filecoin Trust must primarily deal in securities investment, which would require passing the Howey Test. However, FIL’s use case as a payment method for Filecoin’s data storage services could potentially disqualify it from passing the Howey Test. Grayscale has vowed to fight the SEC’s decision, but will comply if unable to convince the regulatory body.
SEC Views Filecoin Trust as an Investment Company
According to the press release, Grayscale has decided to fight the SEC’s decision, although the firm will comply if it cannot convince the regulatory entity.
“Grayscale does not believe that FIL is a security under federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position.
Grayscale cannot predict whether the SEC staff will be persuaded that Grayscale’s position is correct, and if not, whether it may become necessary for Grayscale to […] enable the Trust to register under the ICA of 1940 or, alternatively, seek dissolution of the Trust.”
Following the announcement of the regulatory action against FIL, the token’s price experienced a brief downturn. Nevertheless, CoinGecko reports that the token has rebounded since and was trading at around $4.60 at the time of writing.