Wyoming Introduces Legal Recognition for DAOs

Wyoming has passed a new bill, signaling an important step for decentralized autonomous organizations (DAOs) by incorporating them within an established legal framework. Governor Mark Gordon signed this legislation into effect on March 7, with its provisions becoming active from July 1. This move formally acknowledges DAOs under the Decentralized Unincorporated Nonprofit Association Act (DUNA), responding to the operational and legal challenges these entities face.

DAOs differ from traditional business models as they operate through community-driven decisions, utilizing governance tokens for collective management. This unique structure has previously led to complications within the legal and regulatory domains, especially when tokens were treated similarly to shares of a company, exposing members to potential collective litigation and regulatory scrutiny.

The initiative for this legislation came in the wake of the Commodity Futures Trading Commission’s (CFTC) legal action against Ooki DAO. The case accused the organization of operating without proper registration and sought to hold all token holders accountable for the DAO’s activities.

The DUNA bill aims to address these challenges by permitting DAOs to function as nonprofit entities, capable of generating and distributing earnings among members while offering legal existence as a nonprofit. This framework allows DAOs to present themselves in legal matters, engage with third parties through contracts, manage taxation, and ensures member protection through limited liability measures. This last aspect is crucial as it safeguards individual members from being held responsible for the actions of the DAO or other members.