Web3 Foundation: DOT is not a security

Web3 Foundation, which helps projects like Polkadot’s (DOT) development and financing, claims that the platform’s governance token shouldn’t be considered a security by the United States Securities and Exchange Commission (SEC) because it’s “merely a software,” and that it shouldn’t be a subject to the SEC’s sphere of influence under Gary Gensler.

On November 4, Web3 Foundation Team’s chief legal officer (CLO) Daniel Schoenberger noted on a blog post that the DOT token had “morphed” and was no longer a security but only a piece of software. To back up this assertion, Schoenberger added that it was “compatible with the views” that Web3 Foundation had provided to SEC back in November 2019. He stated: 

“While the Polkadot vision had not contemplated that the blockchain’s native token would be a security, we understood that the SEC’s view was likely to be that the to-be-delivered token would be a security, at least at the time of delivery.” 

Web3 Foundation interacts with SEC’s FinHub

The CLO also mentioned that Web3 Foundation had met with the SEC’s FinHub (their fintech wing) many times to explain the matter and worked to ensure DOT and its blockchain remained in adherence to federal regulations. 

FinHub’s meeting was the result of Gensler’s ongoing invitation for cryptocurrency companies to “come and talk” and review regulations after which the team opted to create a “workable theory of how token morphing may be achieved” to make DOT compliant with securities laws. However, Web3 Foundation has not yet received a response from the SEC on the matter.

Bitcoin (BTC) has been referred to as a commodity by SEC Chair Gensler, while other cryptocurrencies including Ethereum have been referred to as securities. Nonetheless, the shift in SEC’s opinion will result in many “software” companies working on Web3 and cryptocurrency development coming forward and arguing that their tokens are not securities as well.

In the wake of these and other developments, it’s important to know that Polkadot co-founder Gavin Woods has resigned as CEO of Parity Technologies. He will still have a strong connection with the company as its major shareholder.