Wyoming has taken a groundbreaking step in the realm of decentralized finance by passing a law that grants legal status to decentralized autonomous organizations (DAOs). Governor Mark Gordon signed the bill into law on March 7, marking a significant development in the regulation of these blockchain-based entities. The legislation, sponsored by the legislature’s Select Committee on Blockchain, Financial Technology, and Digital Innovation Technology, establishes a legal framework for the formation and management of decentralized unincorporated nonprofit associations (DUNAs) within the state. The new law provides clarity on the requirements for forming a DUNA, defines the roles of smart contracts, and outlines legal responsibilities for both the association and its members.
This move sets Wyoming apart as a pioneer in recognizing DAOs as separate legal entities, ensuring that the organization can be held liable without implicating individual members. The legislation explicitly states that members, administrators, or those authorized to participate in managing the nonprofit association are not automatically liable for contractual breaches. Furthermore, the legal status enables DAOs to engage in various activities, including establishing contracts with third parties, opening bank accounts, paying taxes, and meeting informational reporting requirements. The decision-making process in DAOs operates without central leadership, governed by community rules enforced through blockchain technology, allowing for a decentralized approach to entity management.
Despite the potential for confusion regarding nonprofit status, venture capital firm a16z crypto clarifies that Wyoming’s law does not prohibit DUNAs from engaging in for-profit activities. According to legal experts, both unincorporated nonprofit associations (UNAs) and DUNAs under Wyoming law can participate in for-profit ventures, providing flexibility for activities such as decentralized exchange protocols and social media platforms. This legal recognition aligns with the ethos of web3 while facilitating financial compensation for DAO members, marking a significant breakthrough in the evolving landscape of decentralized finance and governance.
