Here’s Why Polkadot’s DOT Is Not a Security According to the Web3 Foundation

Published on 27 January 2023 at 16:37

Web3 Foundation, the entity in charge of Pokadot’s development, laid out the reasons why DOT is not a security and why it believes the SEC should acquiesce.


Back in 2017, the SEC released Report 21A, better known as the DAO Report. In it, the agency laid out the reasons why the tokens of most DAOs, Polkadot included, should be considered securities.

The paper, however, stated that there were steps development teams could take in order to make their projects not function as securities, should this be desired. In the view of the Web3 Foundation (W3F), DOT does not match the criteria necessary to be considered a security and requests a review from the SEC on the matter.

Software, Not Securities

The 14-tweet thread published yesterday by W3F reads that DOT was never intended to function as a security but as a Layer-1 blockchain, ergo software meant for other companies to build on, according to Chief Legal Officer Daniel Schoenberger.

“When contemplating the launch of the Polkadot network, there was no intention to issue a security. We always thought of DOT as vertical agnostic & use-case agnostic coordinating software.”

Nevertheless, DOT’s development team concedes that the project could have seemed to be intended for financial use primarily and reiterates that they have taken steps to remedy this view.

Steps Taken to Prevent Unwanted Economic Attention

Since 2019, when the Polkadot whitepaper was published, the W3F development team has held repeated meetings with the SEC to assess the progress of the project toward having the status of DOT as a possible security dropped.

According to the W3F, in order for DOT to be considered merely software, true decentralization had to be achieved, and the organization had taken three key steps.

First of all, the W3F wants to ensure all advertising for Polkadot focuses on technology, not on the token itself. Second, the entity has imposed restrictions on whales, limiting the percentage of total DOT supply in order to ensure fair votes and governance.

Lastly – and most importantly, the W3F has reportedly refused to sell DOT to hedge funds and venture capitalists that were interested in the asset as a purely fiduciary investment.

As a result, the team at W3F believes DOT has “morphed” into software and requests a review of the token by the SEC.

If the agency concurs, it would mean that DOT will no longer be held to the same stringent standards applied to cryptocurrencies used primarily as a store of value.

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