Wyoming passed legislation giving DAOs legal status
Wyoming Governor Mark Gordon signed legislation establishing a legal framework for the formation and management of Decentralized Autonomous Organizations (DAOs).
The bill, sponsored by the Legislature's Special Committee on Blockchain, Financial Technology and Digital Innovation, introduces legal status for decentralized nonprofit associations (DUNAs) established in the state.
This is big news for DAOs.
Registration as a DUNA legal entity allows DAOs to enter into legal contracts with other entities and provides legal protection to individual DAO members. Other legal entities available for DAOs refine these parameters.
Learn more from… https://t.co/j16Zr3xkw1
– Ross Shuel | shuel.eth (@0xShuel) March 8, 2024
The document released on March 7 outlines the requirements for establishing DUNA, covers the role of smart contracts and provides provisions on the legal responsibilities of the association and its members. According to the new law, DUNA is a legal entity separate from its members, which means that the DAO itself can be held liable without affecting its individual members.
“A person is not liable for breach of contract of a decentralized non-profit association merely because the person is a member, manager, authorized to participate in the management of the affairs of the non-profit association, or is considered to be a member of the non-profit association.
The DAO is an entity with no central leadership. The decision-making process is bottom-up, the community is governed by a set of rules enforced by the blockchain. Giving the DAO legal existence allows a decentralized entity to enter into contracts with third parties, open bank accounts, pay taxes, and meet data reporting requirements.
Non-profit status
In an analysis on March 8, the venture capital company a16zcrypto confirmed that there is a “fundamental misunderstanding” about the “non-profit” designation proposed by the new law.
According to Miles Jennings, general counsel of a16z, and David Kerr, principal of Cowrie LLC, the Wyoming-based DAO is not prohibited from engaging in for-profit activities.
“Under Wyoming law, both UNA and DUNA can engage in for-profit activities. This is a decentralized exchange protocol, a decentralized social media protocol, you name it.
DAOs are allowed to pay compensation to their members, including compensation for participating in the management process, reads the analysis. “Wyoming's approach supports the Web3 protocol, while still enabling cash flow to digital asset holders. This is a great achievement.
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