Grayscale Disagrees with SEC’s Classification of Filecoin as a Security
Grayscale Investments has publicly disagreed with the United States Securities and Exchange Commission (SEC) over its claim that Filecoin (FIL) should be classified as a security under federal law.
In a letter sent on May 16, 2023, SEC staff told Grayscale that both Filecoin and the Grayscale Filecoin Trust (FILG) may fall under the definition of securities and investment companies under the Investment Company Act of 1940. The letter followed Grayscale’s recent filing to register the Filecoin Trust for public trading.
Grayscale issued a press release in response, stating that it “does not believe that FIL is a security under the federal securities laws” and that it plans to respond promptly with a detailed legal explanation supporting its position.
SEC Requests Withdrawal of Filecoin Trust Registration
According to Grayscale, SEC staff requested that the firm withdraw its application for the Filecoin Trust, citing concerns that the product met the criteria of an investment company.
Grayscale has not indicated any plans to comply with the request immediately. Instead, the company intends to defend its view that Filecoin, a decentralized storage cryptocurrency, does not constitute a security.
“If the SEC staff disagrees with Grayscale’s position, the company may need to consider other options,” the press release noted. These options include seeking accommodations to proceed with registration or dissolving the Filecoin Trust entirely.
Broader Context of Grayscale’s Legal Battles
This latest dispute continues Grayscale’s growing list of regulatory confrontations with the SEC. In 2022, the company filed a lawsuit against the agency after it denied Grayscale’s application to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF).
The ongoing tension highlights the uncertainty surrounding digital asset classifications in the U.S., where the SEC’s approach to crypto regulation has drawn widespread criticism for relying on enforcement actions rather than clear legislative guidance.
The Filecoin Debate and Market Impact
Filecoin is the native cryptocurrency of a decentralized storage network that allows users to buy and sell unused data storage. Its classification as a security could have significant implications for exchanges, custodians, and investors holding FIL in the U.S.
The SEC’s interpretation contrasts with Grayscale’s position, which argues that Filecoin functions as a utility token enabling users to participate in a decentralized protocol rather than as a speculative investment.
Ongoing Regulatory Uncertainty
The SEC’s actions echo its broader campaign against major blockchain firms. The agency’s high-profile case against Ripple Labs, which began in 2020, similarly revolves around whether the company’s XRP token qualifies as a security.
With growing legal challenges from firms like Ripple and Grayscale, pressure is mounting for U.S. policymakers to provide explicit regulatory frameworks for digital assets.
For now, Grayscale maintains that its Filecoin Trust will remain under review while it works to convince the SEC that FIL does not meet the definition of a security — a decision that could shape the future of how digital asset trusts are structured and regulated in the United States.
