Wyoming Governor Signs Milestone DAO Legislation

According to PANews, Wyoming Governor Mark Gordon signed the Decentralized Unincorporated Nonprofit Association Act on Thursday, a milestone legislation that establishes a framework for recognizing decentralized autonomous organizations (DAOs) as legal entities. Supported by a16z crypto, the legislation addresses one of the most challenging legal issues in the emerging industry: how to adapt decentralized organizations to existing financial regulations. The new law does not construct DAOs as limited liability companies but instead uses the model of a nonprofit association, meaning its purpose is not to create profits for its owners, although it can still generate revenue and compensate DAO members. Miles Jennings, a16z crypto's general counsel, explained why the new structure is necessary: it gives DAOs a legitimate existence, enabling them to sign contracts with third parties and appear in court, pay taxes, and assume limited liability for the actions of other members. If a DAO violates the law, the structure will not prevent regulatory enforcement; instead, it will allow the DAO to hire legal counsel and appear in court, meaning that not every voting member of the organization necessarily has to be responsible for the DAO's actions. Jennings described the law as a 'gospel' for governments, as it will bring DAOs into the existing tax framework and generate revenue. The legislation attempts to circumvent the thorny issue of whether crypto tokens should be considered securities, as DAOs have no directors, managers, or profit-maximizing missions. However, Jennings admitted that this structure might not escape the attention of the U.S. Securities and Exchange Commission, which is trying to establish regulation for the vast majority of crypto assets. The biggest challenge Wyoming may face is convincing existing DAOs to adopt the new structure. Jennings said that a16z crypto plans to work with portfolio companies and make it a condition for future investments. He added, 'Some people in the industry think that if you're not subject to the regulatory regime of a particular jurisdiction, then you're not subject to it. By doing so, you're actually putting yourself under the jurisdiction of all jurisdictions. If you want to provide all the existing legal protections for yourself, this is a better way to achieve it for ordinary businesses.'