Wyoming’s new law recognizes DAOs as non-profits

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Wyoming will recognize decentralized autonomous organizations (DAOs) as nonprofits after Gov. Mark Gordon signed the DUNA Act into law.

The Decentralized Unincorporated Nonprofit Association (DUNA) Act was introduced by the Select Committee on Blockchain, Financial Technology and Digital Innovation Technology. It sailed through the Senate in a 23-7 vote before passing the House vote 50-10.

The new law delves into the activities that DAOs can engage in, the requirements for forming a DAO, the use of smart contracts, and the legal responsibilities of the members.

Under the new law, a DAO is recognized as “a legal entity separate from its members for the purposes of determining and enforcing rights, duties and liabilities in contract and tort.”

It adds that a person won’t be held liable for a breach of a DAO’s contract for merely being a member.

When DAOs are involved in legal battles, the law states that any judgment against the organization “is not by itself a judgment or order against a member or administrator of the nonprofit association.”

While recognized as a nonprofit, a DAO can still engage in for-profit activities, clarifies Miles Jennings, the general counsel at a16z crypto, the digital asset arm at VC firm Andreessen Horowitz.

In an analysis of the new law, which takes effect in July, Jennings noted that DAOs are authorized to operate decentralized businesses. They can also make payments for any services provided to their ecosystems, such as participation in governance.

🚨Big News🚨Wyoming just enacted a game-changing law for web3.

It creates a new entity for DAOs – the Decentralized Unincorporated Nonprofit Association (DUNA) – that’s been years in the making.@CowrieLLC and I provide everything you need to know below:https://t.co/ah7uA78mc2

— miles jennings (@milesjennings) March 8, 2024

In an interview with Fortune, Sen. Chris Rothfuss noted that the new law builds on
Wyoming’s continued efforts to become the DAO haven. Rothfuss co-chairs the committee that introduced the DUNA Act.

“This DUNA legislation is just the most recent puzzle piece. We wanted to make sure that we had the flexibility to figure out what the best practices and policies and use cases were in a legislature that was actually capable of being responsive and adaptive,” he told the outlet.

The DUNA Act follows Wyoming’s first effort to legally recognize and protect DAOs, which started with the passing of the DAO law in 2021.

The legal responsibilities of DAO members came into focus when the CFTC went after Ooki DAO and its members in late 2021. In a precedent-setting case, the agency served the lawsuit via a chatbox, accusing Ooki of violating the Bank Secrecy Act. In June last year, a California court ruled in favor of the CFTC, ordering the shutdown of the Ooki DAO and imposing a $643,000 fine.

Watch: Craig Wright Q&A—DAO is a partnership but with no liability protections