The Web3 Foundation, the company behind Polkadot and Kusama, has announced that Polkadot’s native DOT token is now software and no longer a security.

The Foundation claimed the announcement builds on its three years of active engagement with the U.S. Securities and Exchange Commission (SEC) that began in November 2019. The company accepted the SEC’s offer to “come and talk.” with us”.

Polkadot gets involved with the SEC

A blog post from Web3 Foundation legal director Daniel Schoenberger also explained the development. He said that Polkadot did not imagine that its DOT token would be a security and has worked to comply with federal securities law.

In 2019, a few months before Polkadot’s 2020 launch, the SEC’s Strategic Center for Financial Technology and Innovation (“FinHub”) published its Framework for the Analysis of “Investment Contracts” of Digital Assets. This framework made almost all digital assets offered and sold for fundraising purposes considered securities.

However, the framework also highlighted the possibility that an asset that was initially viewed as a security could be reassessed.

Web3 Foundation Says DOT Became Software

This prompted the Web3 Foundation to start a dialogue with SEC FinHub, and it has been doing so for three years. During the period, the Foundation prioritized compliance and obeyed all US securities laws regarding its native token issuance and treatment of buyers.

Schoenberger said the experience with the SEC has been positive and helped the company better understand the regulator’s concerns and develop appropriate remedies for them.

The company now believes that given the interaction with the SEC during the period and how it has complied with all applicable laws, the DOT token has been morphed into software.

“In our view, DOT’s current offers and sales are not securities transactions, and DOT is not a security. It’s just software.”

SEC vs Crypto

Meanwhile, Polkadot’s approach to compliance is markedly different from the current dynamic between the SEC and the crypto industry.

While cryptocurrency stakeholders have urged the SEC to provide more regulatory clarity, Commission Chairman Gary Gensler has repeatedly insisted that most cryptocurrencies are securities.

Currently, the financial regulator is engaged in a series of legal battles against several cryptocurrency companies that it argued sold unregistered securities. Famous among these legal cases is his two-year battle with Ripple over XRP sales.