Summary: Wyoming DAO Bill
Written by Jack Deeb and Bronte Lynch
What is a DAO?
A decentralised autonomous organisation (DAO) is an entity whose decentralised governance is encoded in a smart contract framework. DAOs exist on blockchains and allow an infinite number of participants (including individuals, companies or other DAOs) to coordinate their thoughts, efforts and resources transparently. Like traditional companies, DAOs have:
- Bank accounts (called “treasuries”);
- Formal governance (achieved by voting on “proposals”);
- Stakeholders who participate in that governance (usually referred to as “governance token holders”); and
- The ability to engage third parties (called “service providers”).
DAOs often do not have “managers” or “directors” and instead, are owned and controlled directly by their governance token holders.
Bill 38
On 1 July 2021, Wyoming’s Bill 38 came into effect, making Wyoming the first jurisdiction to recognise DAOs as legal persons. Bill 38 allows DAOs to be registered in the state of Wyoming, thereby enabling DAOs to interact with the rest of the world’s entities. Following Wyoming’s release of the Wyoming Special Purpose Depository Institution (SPDI) charter — a regulatory framework to support digital asset banking activities — Bill 38 bolsters Wyoming’s position at the forefront of blockchain and crypto-asset regulation.
What does Bill 38 do?
In short, the Bill enables DAOs to:
- Register as limited liability companies (LLC) in the state of Wyoming;
- Be recognised by national and international authorities; and
- Engage in contracts and other legal agreements that are legitimate and enforceable in the eyes of the law (for example, employment or investment).
Key provisions of Bill 38
The Bill supplements the Wyoming Limited Liability Company Act (LLC Act) by providing requirements for creating and managing a DAO. Unless specifically modified by Bill 38, the remaining provisions of the LLC Act apply equally to DAOs.
Under Bill 38, a DAO “is a limited liability company whose articles of organization contain a statement that the company is a decentralized autonomous organization”. The Bill contains special provisions allowing DAOs to be algorithmically run or managed, in whole or in part, through smart contracts. The Bill dictates that DAO’s must maintain a presence in Wyoming through a registered agent, and indicate their legal status by including a proper designation such as “DAO”, “DAO LLC” or “LAO” in their name. DAOs can be “member managed” or “algorithmically managed”, as set forth in their articles of organisation. If algorithmically managed, the underlying smart contract must be able to be updated, modified or otherwise upgraded.
Matters of governance, including: relations among members; membership interests; voting rights; transferability; distributions; and amendments, are all governed by the articles of organisation and the smart contracts of the DAO. Importantly, unless stated otherwise in the articles of organisation or operating agreement of the DAO, no DAO member has any fiduciary duty to the DAO or any other DAO member other than the implied contractual covenant of good faith and fair dealing.
The first Wyoming DAO
On 1 July 2021, the American CryptoFed DAO became the first DAO recognised as a legal entity by the Wyoming Secretary of State’s office. The American CryptoFed DAO describes its mission as promoting a two-token economy that is immune from inflationary and deflationary influences.
At the time of writing, 37 DAOs have been registered in Wyoming. The full list of Wyoming’s first-mover DAOs is included at the bottom of this article.
Where are the rest of the DAOs?
Although the number of DAOs registered in Wyoming will continue to grow, the vast majority of existing DAOs remain unregistered.
On 19 June 2021, the Coalition of Automated Legal Applications (COALA) published the Model Law for Decentralized Autonomous Organizations, otherwise known as the DAO Model Law. The DAO Model Law offers an alternative approach to that being taken in Wyoming, but also provides a pathway for DAOs recognised as legal entities with limited liability. Read more about COALA’s DAO Model Law in our previous article.
The Digital Law Association (DLA) have recently suggested that an Australian Senate committee recommend the creation of a new type of legal entity, the “DAO Limited”, under Australia’s Corporations Act 2001 (Cth).
What happens next?
The conversation about “DAOs as legal persons” has happened in Wyoming, is beginning in Australia and will soon begin in other jurisdictions. Be sure to follow us on Twitter and LinkedIn for updates as the conversation unfolds.
In the meantime, let us know your thoughts on Bill 38 and alternative methods for recognising DAOs at law, in the comments below.
Appendix: Wyoming’s first-mover DAOs
- Altcoin DAO LLC (previously known as The Original DAO LLC)
- American CryptoFed DAO LLC
- AUTO DAO LLC
- Bitcoin DAO LLC
- Blockplace DAO L.L.C.
- BLOCKS, DAO LLC
- blockXblock DAO LLC
- BSing DAO LLC (previously known as BS dao LLC)
- Carbon Shift DAO, LLC
- CarbonStar DAO LLC
- Citizen DAO LLC
- Decentralized Web DAO LLC
- Eternia DAO LLC
- Ethereum Crypto DAO LLC (previously known as Ethereum DAO LLC)
- First Investment DAO LLC (previously known as Investment DAO LLC)
- First Social DAO LLC (previously known as Social DAO LLC)
- Governor DAO LLC
- Hedge Against Inflation DAO LLC
- Hope Foundation DAO LLC
- Hypha DAO LLC
- Initial Coin Offering ICO DAO LLC (previously known as ICO DAO LLC )
- KINDLY DAO LLC
- Leading DAO LLC (previously known as The First DAO LLC)
- Meadowlark Wyo DAO LLC (previously known as Meadowlark DAO LLC)
- MIAB DAO LLC
- New Jones DAO LLC
- Non-Fungible Token — NFT DAO LLC (previously known as Non-Fungible Token DAO LLC)
- OBADA, DAO LLC
- Original Bitcoin DAO LLC
- Original Wyoming DAO LLC (previously know as Wyoming DAO LLC)
- Oversimplicated DAO LLC
- OZ Fund DAO LLC
- Principle DAO LLC (previously known as The Best DAO LLC)
- Quantum Street, DAO LLC
- The Song That Owns Itself, DAO LLC
- Yukda, DAO LC
- Zion Firm DAO LLC (previously known as Zion DAO LLC)
