Web3 Foundation claims Polkadot’s native token DOT is software, not a security

Web3 Foundation Chief Legal Officer Daniel Schoenberger claimed Polkadot’s native token, DOT, is “transformed” and is software, not security. Therefore, the token should not be subject to federal securities regulations in the November 4th blog post.

He argues that Polkadot’s vision does not envisage DOT becoming a security, complies with federal securities laws, and does not offer digital assets to initial DOT purchasers. Schoenberger, on the other hand, concedes that the U.S. Securities and Exchange Commission (SEC) will likely consider DOT a security at launch.

federal securities law

The Web3 Foundation has been engaged in consultations with the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub) since the establishment of the “Framework for Analysis of Investment Contracts in Digital Assets” and has received federal approval for offers and sales. We ensure compliance with securities laws. Marketing and shipping to first buyers and treating retail buyers in 2019.

The Federal Securities Framework defines securities as investment contracts and other financial instruments such as stocks, bonds and transferable shares. The framework is contingent on all offers and sales of securities and those related to digital assets to be registered or eligible for an exemption from registration.

This means that companies or individuals offering securities for issuance and sale are legally obligated to disclose certain information to investors. Information must also be comprehensive and not materially misleading. Violators of federal securities laws face criminal prosecution and can be fined $5,000 and/or imprisoned for up to 10 years.

Crypto vs. SEC

The SEC is policing the crypto space. In December 2020, the SEC filed a lawsuit against Ripple and its executives, alleging that he raised $1.38 billion in the sale of XRP and failed to register it as a security.

In October 2022, a government agency investigated whether Yuga Lab’s issuance of the Bored Ape NFT collection and its governance token, ApeCoin, violated the law. Yuga Labs has never been accused of any wrongdoing.

SEC Chairman Gary Gensler has repeatedly classified cryptocurrencies as securities, subject to federal securities law. As the legal battle between the SEC and XRP is still ongoing, Kim Kardashian has taken the crypto offered and sold by EthereumMax without revealing that he received $250,000 to promote the token on Instagram. I was charged $1.26 million for advertising asset security.

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