The Web3 Foundation has suggested that the US Securities and Exchange Commission should not categorise Polkadot’s native token DOT as a security.
The organization supports Polkadot’s research and development, in addition to managing the blockchain’s fundraising.
Daniel Schoenberger, chief legal officer of the Web3 Foundation Team, wrote on November 4 that Polkadot’s native token had “morphed” and was not security but a “software.”
After some negotiations with the SEC in November 2019, Schoenberger stated that the claim was “consistent with the views” it had shared with the agency.
“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,” remarked Schoenberger, adding that they were doing everything they could to ensure that DOT would be deemed as a non-security.
The CLO said that the Web3 Foundation often communicated with FinHub, the SEC’s fintech division, as part of chairman Gary Gensler’s enduring invitation for cryptocurrency companies to “come in and talk.”
The team launched a “workable theory of how token morphing may be achieved” for DOT according to the SEC’s concerns and American federal regulations.
Although the fundraising company claimed it “shared this theory many times with the SEC” regarding DOT not fulfilling the criteria of security, it is uncertain how the federal regulator will reply to the allegations that appear to be under their jurisdiction. The SEC frequently bases regulations on enforcement actions; in a lawsuit against a former Coinbase product manager, the regulator specifically referred to nine tokens as “crypto asset securities” in July.
Schoenberger’s unequivocal assertion that the DOT token should be regarded as largely beyond the SEC’s regulatory oversight is comparable to that of many XRP supporters.
The SEC and Ripple are currently at odds over claims that the company, co-founder Christian Larsen, and CEO Brad Garlinghouse sold unregistered securities using XRP to acquire over $1 billion. Advocates of Ripple have maintained that the token is not a security and have criticized the SEC for abusing its authority.
