Wyoming Governor Mark Gordon has officially signed a bill that establishes a legal framework for the creation and management of decentralized autonomous organizations (DAOs). The bill, which was sponsored by the legislature’s special committee on blockchain, financial technology, and digital innovation, introduces a legal status for decentralized unincorporated nonprofit associations (DUNAs) that are based in Wyoming.
The document, enacted on March 7, outlines the requirements for forming a DUNA and covers the roles of smart contracts. It also provides provisions regarding the legal responsibilities of the association and its members. Under the new law, a DUNA is considered a separate legal entity from its members. This means that the DAO itself can be held liable without implicating its individual members.
A DAO is an entity that operates without central leadership. The decision-making process is bottom-up, with a community governed by a set of rules enforced by a blockchain. By giving a DAO legal recognition, it allows the decentralized entity to enter into contracts with third parties, open bank accounts, pay taxes, and meet informational reporting requirements.
Regarding the nonprofit status of DAOs, venture capital firm a16zcrypto analyzed the new law and highlighted a “fundamental misunderstanding” of the term “nonprofit.” According to Miles Jennings, a16z’s general counsel, and David Kerr, principal at Cowrie LLC, a Wyoming-based DAO is not prohibited from engaging in for-profit activities. Additionally, DAOs are allowed to compensate their members, including in exchange for participation in the governance process. The analysis states that Wyoming’s approach supports the web3 ethos while still enabling cash flows to digital asset holders, calling it a significant breakthrough.
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