SEC has said nothing to prove Polkadot is not a security

By November 10, 2022Polkadot
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Polkadot supporter Web3 Foundation recently claimed that the $7 billion token Polkadot (DOT) has made friends with the Securities and Exchange Commission (SEC) and no longer qualifies as a security — instead, it’s software. Only, no evidence exists that the SEC made such a claim.

Last week, Web3 Foundation Chief Legal Officer Daniel Schoenberger claimed in a blog post that ever since 2019, it has taken steps to comply with SEC regulations in the hopes of changing DOT from a security to something else.

“Whatever it took in order for DOT… to be — or to become — a non-security, we were willing to do it,” he wrote.

Therefore, his team took up the SEC on its offer to come in and talk. Schoenberger described how Polkadot’s dialogue with the SEC maintained “a spirit of open communication and dialogue.”

Somehow, as a result of these communications, and without engaging with the enforcement division of the SEC at all, the Polkadot community claims it was able to gain the SEC’s most sought-after designation for a crypto asset: not a security.

Further, that the SEC issued a no-action letter regarding DOT and that commissioners responded to press inquiries regarding DOT’s designation.

The SEC has said zilch about DOT’s security designation

However, the SEC hasn’t provided any evidence for this highly unusual, unilateral announcement from Polkadot. There’s no comment from the SEC regarding this designation, nor has the Web3 Foundation cited a no-action letter or similar injunction.

In fact Gary Gensler, Chairman of the SEC, has previously replied to Congress regarding the name and number of no-action letters issued to crypto asset issuers. Gensler disclosed less than a dozen such letters to a small number of projects like IMVU, TurnKey Jets, and Pocketful of Quarters — but not Polkadot.

No "no action letter" means it didn't happen. DOT holders need to be wary of the SEC.

Where’s the no-action letter?

This means the only existing evidence is Polkadot’s word for it — and further implies Gensler got it wrong. Community members thought it was strange.

Polkadot and the SEC could settle this issue by producing a no-action letter indicating that the SEC will not pursue any legal action against DOT — yet hasn’t done so.

Web3 Foundation’s blog post was published only weeks after Polkadot co-founder and Web3 Foundation founder Gavin Wood announced he will step down as the CEO of Parity Technologies, which provides infrastructure support for Polkadot. Wood retains his majority stake and will stay on as chief architect.

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