Legal Framework of DAOs

In the DAOstack community Telegram @matan [CEO/Architect] and Roberto Klein [Legal] had a back-and-forth with multiple community members about the legal framework behind DAOs:


Q.) J A "Hi, can someone please describe me how they see the legal framework of DAOs playing out? Will it be seen as a legal entity or related to contribution[?]"

A.) Roberto Klein [Legal]:

Not sure the exact context of the question, so…
The definition one uses of “legal entity” may vary. For instance:

  1. One may choose to define “legal entity” as an entity established under the legal establishment, which in essence is bound by the law of a defined jurisdiction. In such case, In principle, a DAO does not have to be bound by a jurisdiction, and thus is not a “legal entity” in that respect.
  2. As the blockchain itself can also be considered “law” (“code is law”) or the enforcing agency, then in that case a DAO would be a legal entity which is bound by the law of the blockchain.

A.) Alternate answer from @Matan [CEO/Architect]:

Thanks J , this is a very good question and its answer is not yet crystalized. There is a lot of discussion about the legal status and framework of DAOs around the world. It is somewhat reminiscent the discussion people had about the legal framework of corporations as legal personas in the old days. The difference, though, is that corporations can be regulated, and thus enforced under law, while that a fully decentralized organization might not be enforceable by law. Certain platform (or perhaps certain network effect) can decide to abide the network effect to certain law, or jurisdiction, and by that to some extent abide DAOs that are supported by that network effect to that. There’s many more questions within this topic (all of which are still experimental), if you have anything more concrete in mind I’d be happy to hear your thoughts. This is the first result in Google: https://www.deepdotweb.com/2017/03/26/legal-aspects-dao-decentralized-autonomous-organization/

Q.) Follow up by J A: "So imagine that as a DAO we create a new product and decide to start selling that product or start to conduct any business, who would be liable to eg taxation or illigal activities ?"

A.) Roberto Klein [Legal]:

That is a question that is at the heart of current research related to blockchain technologies.
Actually, one of DAOstack senior advisors (Primavera) recently published a book on this matter, and I highly recomend it:


Q.) Brett followed up with: "What are some of the top law firms/experts in this area if one were to be seeking legal advice… Are there any standout firms/individuals actively looking at the DAO space from a legal perspective?"

A.) @Matan [CEO/Architect]:

I’m not sure. But:

A.) Alternate answer from @eriktrodrigues [CM]:

This article has come to my attention, I think it might be interest to your research: https://www.coindesk.com/how-to-sue-a-decentralized-autonomous-organization/

@papa_raw
I have found two new informations about this topic

  1. Vermont route:
    One can incorporate a Dao in Vermont. As a Blockchain Based LLC. There is a law in Vermont giving a DAO legal status. The DAO Dorg.tech is incorporated in Vermont.
    The DAO Woodshares is investigating where it should incorporate and what are the legal consequences of this.
    https://legislature.vermont.gov/statutes/section/11/025/04173

  2. Malta route
    The Maltese government also launched a law in May 2019 about incorporation DAOS legally: https://www.financemalta.org/publications/articles-interviews/articles-and-interviews-detail/innovative-dao-being-set-up-in-malta-2018/

Some of the key questions there are are:

A. Is the board of directors of the incorporated entity legally liable for actions of the DAO?
B. Who are the owners of the shares of the incorporated entity? How is that list of owners maintained?
C. When one - a legal party - takes the legal entity to court in Vermont or in Malta, who will represent the DAO?
D. Can the DAO have a smart contract that legally binds the DAO to a party? E.g if the DAO agents vote for implementing this smart contract does the Board of Directors have any say in this? Their names are known.

I hope this is a contribution to this thread. Feel free to adjust, remove this comment if you see necessary.

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