The state of Wyoming passed landmark cryptocurrency legislation to bring DAOs under existing law and address the problems synonymous with decentralized organizations.
Wyoming Governor Mark Gordon approved state legislation March 7 that would recognize decentralized autonomous organizations (DAOs) as corporations under the Decentralized Unincorporated Nonprofit Associations Act (DUNA). This law is scheduled to go into effect on July 1.
Unlike traditional corporate operations, DAOs are run by communities and provide decision-making authority through cryptocurrency governance tokens collectively held by members.
This concept ultimately raised legal challenges for both participants and regulators. Tokens created by the entity have been likened to company stock and have been scrutinized using securities laws, and members have been subject to comprehensive litigation action.
This was clearly revealed in the Commodity Futures Trading Commission (CFTC) lawsuit against Ooki DAO. The CFTC accused the organization of operating an unregistered trading venue and took steps to hold all Ooki token holders accountable for their DAO operations.
DUNA creates a haven for DAOs
Wyoming’s DUNA bill addresses these issues by utilizing the unincorporated nonprofit association model to allow decentralized organizations to generate revenue and distribute profits to members while maintaining their legal existence as nonprofit organizations.
DUNA empowers these organizations to appear in court under legal representation and agreements with third parties. Under Wyoming law, the DAO is now taxable and its members are protected through a limited liability policy. This means that members may not be held accountable for the actions of other members or the organization as a whole.
Miles Jennings, Cryptocurrency General Counsel at Andreessen Horowitz (a16z), said DUNA has reached a critical juncture in cryptocurrencies and will solve key issues previously faced by these decentralized organizations. A16z supported the development of the bill and sees its passage as a watershed moment for all of web3.
“Wyoming’s new law will ensure that blockchain projects can operate within the scope of the law without compromising decentralization. It also remains unauthorized. “This is a groundbreaking development.”
Miles Jennings, a16z Cryptocurrency General Counsel