Wyoming Makes History: New Law Recognizes DAOs as Legal Entities, Enables Profit-Generating Activities
Summary:
Wyoming Governor Mark Gordon has approved a new law providing a legal and operational framework for decentralized autonomous organizations (DAOs). The law allows DAOs to register as legal entities under the "Decentralized Unincorporated Nonprofit Associations" (DUNAs) category, enabling them to enter into legal contracts and provide individual members with added protections. It establishes DAOs as separate entities from their members, allowing the DAO to be held liable without implicating its individual members. Notably, Wyoming-based DAOs are allowed to engage in profit-generating activities despite a "nonprofit" designation.
Governor Mark Gordon of Wyoming has approved a legislative piece that sets the operational and legal guidelines for decentralized autonomous organizations (DAOs). The law, which originated from a special legislative committee focusing on blockchain, digital innovation, and financial technology, sets the parameters for recognizing decentralized unincorporated nonprofit associations (DUNAs) based in the state. The move marks a significant advancement for DAOs.
The opportunity for DAOs to register as legal DUNA entities will empower these organizations to enter into lawful agreements with other entities, and will offer added legal protection to individual DAO participants. Preexisting legal options for DAOs have not provided these advantages.
The signed legal document, dated March 7, details the prerequisites for setting up a DUNA, elaborates on the role of smart contracts, and defines the legal obligations of the association and its members. The law notably separates DUNA as a legal entity from its constituents, thus making it possible for the DAO to assume liability without affecting individual members.
DAOs, devoid of centralized authority, operate on community decisions guided by blockchain-enforced rules. Offering DAOs legal recognition allows these decentralized organizations to enter contracts with other parties, open bank accounts, fulfill tax obligations, and comply with informational reporting needs.
A recent March 8 examination by venture capital company a16zcrypto highlighted the necessity to clarify the "nonprofit" tag attributed in the newly passed law. According to Miles Jennings, the general counsel of a16z, and David Kerr, a principal at Cowrie LLC, a DAO in Wyoming can engage in profit-generating activities. The law permits both UNA and DUNA entities to participate in activities meant for profit, such as managing a decentralized exchange protocol or a decentralized social media protocol.
The legislation also gives DAOs the liberty to financially compensate its members, even for participating in the governance process. The move is seen as aligning with the web3 ethos, while also enabling cryptocurrency owners to benefit from potential revenue streams, marking it as a notable milestone.
Published At
3/9/2024 12:24:54 AM
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