Mark Cubans Take on SEC Labeling Filecoin as Security

Mark Cubans Take on SEC Labeling Filecoin as Security


The SEC’s labeling of Filecoin as a financial security and Mark Cuban’s suggestion on how crypto firms can avoid future SEC lawsuits on potential securities law violations have sparked a reaction among the crypto community.

A recent letter from the United States Securities and Exchange Commission (SEC) to leading financing management company Grayscale has sparked a reaction among the cryptocurrency and Filecoin community. The SEC labeled Filecoin a financial security while responding to Grayscale’s Filcoin Trust registration statement.

Billionaire investor Mark Cuban commented on a recent tweet about the SEC’s states. Although while articulating his response, Cuban suggested ways cryptocurrency corporations can avoid future SEC lawsuits on potential securities law violations.

Mark Cuban’s Lawsuit-Evading Idea

Mark Cuban narrated a scenario where digital currency issuing corporations could evade an SEC lawsuit by releasing their entire crypto token supply without leaving treasury reserves. Cuban suggested that the corporations use their crypto tokens for liquidity on decentralized finance (DeFi) applications.

Then, dissolve the original entity that released the crypto tokens, circling in the secondary market without direct ties to the underlying blockchain.

The billionaire tagged his idea “true decentralization.” That will prevent regulatory authorities like the SEC from closing down the crypto token like it’s attempting to do with Filecoin and others.

Cuban’s suggestion stirred reactions from the cryptocurrency community members. Someone said the United States securities laws are “black holes that suck in everything invested.” 

Another respondent said Cuban’s idea wouldn’t work with protocols as it requires minting all crypto token supplies upfront, which is limiting.  Nonetheless, a smart contract could hold the crypto token supply, releasing it under governance or in a predetermined manner.

Even the pro- XRP Ripple (XRP) lawyer, John Deaton, weighed in. Deaton commented on Cuban’s suggestion, describing it as “smart and probably someone’s playbook at the moment.”

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Nonetheless, the lawyer insisted that the cryptocurrency ecological system continue fighting the SEC’s narrative that tags every crypto token but Bitcoin (BTC) as a security. Summing it up, Deaton wrote: “The underlying investment in an financing contract is never a security.”

Grayscale Disagrees With SEC States On Filecoin

These discussions weigh in on a press release that stated Grayscale disagreed with the SEC’s assert that Filecoin, the underlying investment in its new trust fund, is a security.

Grayscale Assets filed a registration statement of its Grayscale Filecoin Trust (OTCQB: FILG) with the SEC on April 14, 2023.

The digital investment management company wanted to register the trust’s shares under section 12(g) of the Securities Exchange Act of 1934. On the other hand, the company received a letter from the SEC stating that FIL, the trust’s underlying investment, is a security.

Grayscale plans to respond to the regulator’s letter. Although while it cannot predict the SEC’s reaction to its response, Grayscale would seek other ways to register the trust should the regulating authority disagree.

Featured image from Pexels, a chart from Tradingview.com

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