A federal court judge ruled Monday that Lido DAO, the governing body behind the popular liquid staking protocol, can be treated as a general partnership under state law.
The court dismissed Lydon's claim that it was not a legal entity, classifying it as a general partnership and setting a precedent for how for-profit DAOs are treated.
It is also determined that identified participants are directing the operations of the DAO and therefore cannot escape accountability due to its decentralized structure. Court documents Filed in the US Northern District Court of California.
“[The lawsuit] “It raises a number of new and important questions about the ability of people in the crypto world to insulate themselves from liability by creating new legal arrangements to profit from specific financial instruments,” Judge Vince Chabiria wrote in the decision.
Paradigm Operations, Andreessen Horowitzand Dragonfly Digital Management are said to be actively involved in Lido's management and operations as general partners.
However, another investor in Lido, Robot Ventures, was fired for insufficient participation.
Miles Jennings, general counsel and head of decentralization at a16z crypto, said Judge Chabiria's decision “dealt a major blow to decentralization.” press release Posted by X on Monday.
“According to the decision, any participation of the DAO (even posting in the forum) may be sufficient to make the members of the DAO responsible for the actions of other members under the general partnership laws,” he said.
what happened
According to court documents, plaintiff Andrew Samuel purchased LDO tokens on the secondary market in April and May 2023 on the Gemini exchange.
In December of that year, Samuels presented A class-action lawsuit filed after he lost money buying the platform's native LDO tokens, claiming they were sold as unregistered securities and blaming Lido DAO for the drop in value.
On Monday, the court agreed with Samuel's argument that Lido's structure—where token holders direct decisions and receive rewards—is a general partnership under California law. Lido Dao stated that the lack of a direct token sale did not exempt it from liability.
“Courts have interpreted the statutory phrase ‘offers or sells' to cover a person ‘soliciting' the purchase of securities. Samuels sufficiently alleged that Lido solicited the purchase of these tokens on crypto exchanges.
Lido Dao acts as a general partnership, because “an association of two or more persons to establish a business as farmers for profit constitutes a partnership, whether or not the individuals intend to form a partnership,” the court ruled, citing the state. Law.
Edited by Sebastian Sinclair
Daily Debrief Newspaper
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