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Wyoming governor signs into law a bill to give DAOs legal standing in the state

The BlockThe Block2024/03/08 17:31
By:The Block

Quick Take The bill would give DAOs legal existence, which enables them to contract with third parties, open bank accounts, appear in court and enables them to pay taxes. Miles Jennings, a16zcrypto general counsel, called the bill a “major breakthrough” on Friday on X.

A new bill was signed into law in Wyoming that would give decentralized autonomous organizations legal standing in the crypto friendly state.

The bill, called the Wyoming Decentralized Unincorporated Nonprofit Association Act, dubbed DUNA, was signed into law by Governor Mark Gordon on Thursday.

Miles Jennings, a16zcrypto general counsel, called the bill a "major breakthrough" on Friday on X. The venture capital fund advised on the bill and testified before the state's Senate and House committees.

"Wyoming’s new law will enable blockchain projects to operate within the bounds of applicable laws without compromising their decentralization," Jennings posted on X.

DAOs have met the ire of U.S. regulators over the past few years. The Commodity Futures Trading Commission notably won a case last year involving Ooki DAO after the group failed to respond. The judgment set a precedent that other DAOs could be held liable for legal violations as a "person" under the Commodity Exchange Act.

Wyoming's bill would give DAOs legal existence, which enables them to contract with third parties, open bank accounts, appear in court and enables them to pay taxes, Jennings said in a post about the new bill.

"It accomplishes all of this without interfering with how DAOs are currently launched and operated – it safeguards decentralization and positions DAOs to effectively grow the ecosystems of their underlying blockchain networks," Jennings said.

Securities laws implications

The Securities and Exchange Commission often invokes the Howey Test , which is based on a 1946 U.S. Supreme Court case frequently cited by the SEC to determine if an asset qualifies as a security. The test says an asset has to have three components — an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.

Jennings said DUNA bolsters arguments that the third component of Howey is not satisfied, in part because DUNA is an "inherently decentralized entity" and doesn't have a management function, such as officers and directors.

"While SEC theories about the applicability of U.S. securities laws to digital asset transactions are amorphous and constantly changing, the fact remains that they are bound by the Howey case law and its progeny. Under that case law, adoption of a DUNA can be used by a DAO to bolster its community’s arguments against the application of securities laws to the digital assets of that DAO," Jennings said.


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Disclaimer: everything in the article represents the author's point of view and has nothing to do with this platform. This article is not intended to be used as a reference for making investment decisions.

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