17 ms·

Court Ruling Could Affect the Future Direction of DAOs

94 points by wallflower 4y ago

sharemywin 4y ago
Seems to me to make sense. if you don't file any paper work with the state and agree to start a money making enterprise with more than one person your a general partnership. Whether your an active or passive investor or not would probably depend on how much "work" you put into the partnership(not related to the article just my thought). Not a Lawyer so take anything I say as anything more than uneducated internet speculation. Other than the risk of all your assets getting hacked and stolen to doesn't seem like a bad way to "enforce" a contract. Maybe would be better if things were split up into different accounts with different people holding different keys so you don't have a single point of failure. Just like with SVB there should be some kind of insurance for large accounts. with various audit and other processes to keep things "safer"
- JumpCrisscross 4y ago
  > your an active or passive investor or not would probably depend on how much "work" you put into the partnership Legally, it requires paperwork filed ex ante. As the article notes, several states have DAO LLC constructs. DAOs that don't incorporate do, and should, expose their holders to unlimited liability. That is the default. (If you and I start an unincorporated car-washing business, and it destroys someone's car, we will be jointly sued and liable, though I may separately have individual claims against you if you made all the wrong decisions.) The situation all this seeks to avoid is profit-seeking enterprise having everyone who stood to gain when things went well standing up saying "not it" when things don't. If a DAO–or any other business or person–causes you injury, it shouldn't be your job to figure out who contributed to what degree.
zoklet-enjoyer 4y ago
Wyoming has a DAO LLC https://sos.wyo.gov/Business/Docs/DAOs_FAQs.pdf https://sos.wyo.gov/Business/Docs/DAOs_FAQs.pdf
- pavlov 4y ago
  Interesting law. It seems that this kind of DAO is a Wyoming LLC with all the existing obligations and the extra requirement that you have to file Wyoming paperwork if your smart contracts are modified: Articles of organization shall be amended when: (i) There is a change in the name of the decentralized autonomous organization; (ii) There is a false or erroneous statement in the articles of organization; or (iii) The decentralized autonomous organization's smart contracts have been updated or changed. A DAO may not be "foreign", but it's not defined what exactly that means: "The secretary of state shall not issue a certificate of authority for a foreign decentralized autonomous organization." I'm guessing that most DAOs don't want the legal liability of an American LLC, so there may not be a lot of takers.
  - wsh 4y ago
    In context, “foreign” means an entity registered in another state or country. See the FAQ: Can I register my out-of-state DAO? No. A certificate of authority for a foreign DAO cannot be filed pursuant to W.S. 17-31-116.
    - rtkwe 4y ago
      What does that even mean for a DAO to be out of state? Is it based on people with voting power in the DAO?
      - houston_Euler 4y ago
        IANAL, but I believe it means that the company can't be headquartered somewhere else.
        rtkwe 4y ago
        In terms of a pure DAO though that's a weirdly nebulous distinction. Before incorporation they're nowhere legally speaking, there's not a single physical location it's operating out of. Maybe like others have said it's mostly about otherwise extant orgs not being able to register.
the88doctor 4y ago
This case just confirmed what we already knew before: DAOs are just groups of people working together, and they don't get any special treatment just because they coordinate their activities via blockchain instead of email. Enforcement will be the interesting part. If a DAO has anonymous members and no LLC or corporate structure associated with it, then a court can rule that the members are liable, but it could be very difficult to enforce that liability.
- AlexandrB 4y ago
  Many of them don't even coordinate their activities via blockchain because it's too slow and expensive[1]. [1] https://www.banklesstimes.com/news/2023/03/08/off-chain-governance-strikes-a-chord-with-daos-as-77percent-of-them-favor-it-over-any-other-form/ https://www.banklesstimes.com/news/2023/03/08/off-chain-gove...
  - zoklet-enjoyer 4y ago
    Governance activities are talked about on forums and chatrooms. Governance is voted on on-chain Edit: I'm posting too fast, so here's an edit for a reply I don't know anything about Ethereum DAOs. Check out Tendermint chains (Cosmos, Osmosis, Crescent, Stargaze, EVMOS, Kava). Gas is cheap and all voting is on-chain. Governance discussions happen mostly on a forum called Commonwealth and then they're put on chain and voted on by validators and stakers.
    - AlexandrB 4y ago
      Except when it's not: https://docs.decentraland.org/player/general/dao/overview/how-does-the-dao-work/ https://docs.decentraland.org/player/general/dao/overview/ho... > To circumvent the very high gas fees associated with full on-chain governance, Decentraland’s DAO uses a combination of free, off-chain voting for the community and a multi-sig wallet controlled by a “DAO Committee” to enact those off-chain decisions on the Ethereum blockchain. I'm not a huge follower of the crypto ecosystem and DAOs, but this kind of thing seems like it's pretty common.
user3939382 4y ago
Oh no https://en.wikipedia.org/wiki/Data_access_object https://en.wikipedia.org/wiki/Data_access_object
UncleEntity 4y ago
> And the question remains whether the court would reach a different result if it turns out that the named plaintiffs hold BZRX tokens. That could mean those plaintiffs are fatally conflicted from pursuing their claims, as they would effectively be both plaintiffs and defendants under their theory of the case. This is the part I don’t understand, if they succeed in making the case all “owners” are liable wouldn’t they equally be liable for the money they lost? And the thousand years to get paid back part — are you a hodl or not?
- JumpCrisscross 4y ago
  > wouldn’t they equally be liable for the money they lost They aren't equally liable, they are jointly and severally liable [1]. Equal liability implies a liability cap where there isn't one. [1] https://www.investopedia.com/terms/j/joint-and-several-liability.asp https://www.investopedia.com/terms/j/joint-and-several-liabi...
naikrovek 4y ago
dear Lord, I've been very good, mom said that she is thankful I helped her with housework and that my room has stayed very clean. as always, I donate all of my income to charity and volunteer for 40 hours every week. can I have one thing? just one thing? my one wish is to never have my day cluttered with f*king blockchain BS again. thank you
- tiku 4y ago
  Nah Blockchain is here to stay.
mr337 4y ago
I have been out of the loop of DAO and how they are organized and manage changes. My first explaining of that was in Folding Ideas part of Decentraland [1]. The DAO portion did not look so good. So still trying to figure out if this is just a phase or there is some legitimacy to a DAO. 1 - https://youtu.be/EiZhdpLXZ8Q?t=4923 https://youtu.be/EiZhdpLXZ8Q?t=4923
wilg 4y ago
My important and real DAO [1] is not worried about this [1] https://earth.cheap/ https://earth.cheap/
- deleted 4y ago
  [deleted]
- nosequel 4y ago
  Thanks for the laugh. I really hope you reach your goal of 5.3 quadrillion dollars.
- deleted 4y ago
  [deleted]
throwanma 4y ago
"... In The US"
a1371 4y ago
> The plaintiffs alleged they lost $1.7 million in the cyberattack and that the repayment plan would take thousands of years to make them whole Creative repayment plan. > the court focused on statements by the bZx Protocol developers that creation of a DAO would insulate the Protocol “from regulatory oversight and accountability for compliance with U.S. law Looks like they attempted the "citizen of the earth" card.
poof131 4y ago
Regulatory arbitrage in Web3 seems to be coming to and end. My assumption is 1) If your contract is upgradeable it isn’t decentralized. Might as well be hosting on EC2. 2) If a multi-sig runs your governance contract or treasury it isn’t decentralized. Might as well form an LLC or C corp. 3) From a more NatSec perspective, if a SEAL team or the FBI can reach a few people in your DAO and your project would shut down, you aren’t decentralized. Which all seems good and as it should be, to stop people LARPing as decentralized to avoid regulations.
- rcme 4y ago
  > 1) If your contract is upgradeable it isn’t decentralized. Might as well be hosting on EC2. One benefit of hosting on the blockchain is that you can build an arbitrary derivative on top of any blockchain object. It's harder to do that with something random running on EC2.
saurik 4y ago
I found another article by some lawyers that is interesting about this case: https://us.eversheds-sutherland.com/mobile/NewsCommentary/Legal-Alerts/250623/DAO-members-may-be-jointly-and-severally-liable-for-55-million-crypto-theft https://us.eversheds-sutherland.com/mobile/NewsCommentary/Le... What I find most fascinating is that most "DAOs" you see are entirely window dressing: at the end of the day, there are a few people who actually run the assets and control the code being run who are merely promising to take direction at the whim of the people who hold some token, which is effectively just an illegal way to build a corporation and sell stock. It is possible to do something that is actually run by a truly decentralized and autonomous mechanism but there are serious limits; like, if you are running things on just Ethereum you can write code that handles code upgrades by using an on-chain vote... but it would not be trivial (I won't say quite impossible) for the DAO holders to then vote to transition the system to Polygon somehow, as what would that mean from the perspective of the code running on Ethereum? Or like, you couldn't have the DAO on Ethereum do something as simple as own a .com domain name. This situation is in some sense no different for this DAO. They apparently had an actually-decentralized one on Ethereum, which is surprising as it is so rare... but, as mentioned in this article I found--and not in the article linked for this thread which is concentrating on the general partnership question--they cut corners when they decided to go multi-chain, and the DAO supposedly owned contracts on a couple other networks, including Polygon. The hack then wasn't "the DAO decided to use buggy code and now the DAO members are liable": it was a phishing attack against a single developer sitting on a single key that allowed for control of the code--and thereby the money--on Polygon, as the DAO was only really able to ask that developer to take action and then hope he did it. That extra context to me makes this whole thing even more of a fascinating case study. Like, one might then just want to say "this thing was never decentralized to begin with: the owner of the key was liable" and yet weirdly the case isn't brought merely against that developer... it is brought against the DAO that in some sense supposedly hired the developer and was negligent in letting the one developer have the key for all the money on another network, something they never should have done! In some sense, then, this is a remarkable win for the concept of a DAO. I mean, sure: some people likely wanted a DAO to be some kind of "regulatory arbitrage" (as noted in complaints about them here on Hacker News) and are going to be sad at the idea that the DAO holders actually have some kind of liability in the actions that the DAO takes... ...but that was NEVER--I am serious: NEVER--an informed take on a DAO. The point isn't to make it somehow impossible to sue the people who own it, it is to build a new form of organization wherein the ownership is liquid and people have a direct democracy over the actions of the organization. If someone sued a co-operative--a common form of company where the customers and/or employees are the owners; I have had numerous friends who lived in the local student housing co-op and I'm myself a member of the local food co-op--it would not be surprising or disappointing to me if all the people who were deemed owners had some potential liability. Now, I don't think the co-op holders (such as myself if my local food co-op does something bad, even though I absolutely am allowed to go to meetings and vote on their actions!) actually have much liability, but only because American corporate law is out of control on liability separation; like, I personally think big tech shareholders should have joint and several liability over the shit decisions these companies make that harm customers; but that (very sadly to me and I believe incorrectly) isn't how it tends to work in the United States... hell: the employees and even managers of the company taking the actions often don't have liability, which is just crazy-town. But so, OK: when I see this argument that the DAO can actually be a defendant and can actually have liability that can actually be shared among its owners, to me that is an almost-incredible vindication of the concept. Hell: apparently, the companies that were the original developers of this mess in fact were considered to NOT have liability anymore, having SUCCESSFULLY transferred that to the DAO? That's hilarious!! Now, does this mean it is a good idea to own "shares" in a DAO? Hell no ;P. And yeah: I'd like to think this would kill a lot of interest in holding a non-negligible quantity (as it can be hard to not own any, which is why this article focused on non-negligible) of the tokens for a DAO, in the same way I can't imagine many people would own stock in Apple if they could be held joint and severely liable (which maybe is actually going "too far"... we here in the US love our liability extremes ;P) for its actions.
Canada 4y ago
What would happen in the case of a general partnership where 5 people put some money together to buy a house for $1M: Partner 1: $500,000 Partner 2: $250,000 Partner 3: $249,000 Partner 4: $999 Partner 5: $1 They issued paper receipts representing these proportions. All agreed that any rent collected would be paid to the paper holders Pro rata. All parties have to show up to review/approve/reject a tenant, and all have to show up to collect the rent on the due day. Each person writes their own receipts and signs all the others, so no one party is more in charge than any other. Partner 3 sells 100,000 receipts to someone else, we'll call Person A, for $101,000. Then the house burns down and is lost, so there's not going to be any rental income now and nobody is interested in buying the receipts anymore. None of the parties did anything to cause the fire. Now who can sue successfully? (Not saying the facts of the case in the article match my hypothetical exactly.)
- vkou 4y ago
  > Now who can sue successfully? Nobody? All I see is six morons that have joint ownership in a house that were all too cheap to pay for insurance. And since nobody's at fault for the fire, tough cheese. Person A might be able to sue whomever sold him the receipts, but only if he was lied to about how the organization functions.
- deleted 4y ago
  [deleted]
- gamblor956 4y ago
  This is a pretty standard partnership issue. In your scenario, nobody's at fault for anything, so nobody can sue anybody. But what if Partner 2 set fire to the house? Then the other Partners (now including Person A but not Partner 3) could sue Partner 2 for losses. Or what if Person B, a tenant, suffered harm due to negligent maintenance of the house? Person B could sue any or all of the Partners (now including Person A but not Partner 3) for damages. And each partner would be "jointly and severally" liable for all of Person B's damages (so if Partner 5, owning a tiny portion of the partnership ended up getting sued and owing damages to Person B, they would need to sue the other partners for reimbursement). But note that Partner 3 selling his partnership interest to Person A would, in many states, trigger the dissolution of the original partnership. In this case, it doesn't matter since they never bothered to form any custom organization documents or financial allocations.
olliej 4y ago
Why do people think "doing the same as X but 'with blockchain' instead of paper" means "legally different from X"? If doing X is illegal, adding blockchain to it doesn't magically mean you're not doing X. If doing X means you have to pay taxes, doing X with linked lists doesn't mean you don't have to pay taxes. If doing X means you have a bunch of liabilities, then doing X on a block chain means you have a bunch of liabilities. The only thing that makes a DAO different from a partnership is that decision making is arguably public on the blockchain, instead of an email thread. Again, why would you think that doing it on a blockchain makes it different from email, or in person, or whatever. Now in fairness, I certainly didn't think of DAOs as being an unlimited partnership, but that's largely because I didn't think about it because they seem fairly pointless. As the court seems to be saying a DAO is fairly clearly a partnership, and they very deliberately terminated the LLC and didn't create an LLP, so the lack of liability protection follows logically from that.
zeryx 4y ago
DAOs require a legal identity, otherwise one will be provided. For anyone who has been thinking about the intersections between DAOs and the law, this was obvious. You can still manage your membership on chain, and there are plenty of great structures that are more DAO friendly - my organization uses a MI LLC structure (midao.org is what we used)

94 points by wallflower 4y ago

Seems to me to make sense. if you don't file any paper work with the state and agree to start a money making enterprise with more than one person your a general partnership. Whether your an active or passive investor or not would probably depend on how much "work" you put into the partnership(not related to the article just my thought). Not a Lawyer so take anything I say as anything more than uneducated internet speculation. Other than the risk of all your assets getting hacked and stolen to doesn't seem like a bad way to "enforce" a contract. Maybe would be better if things were split up into different accounts with different people holding different keys so you don't have a single point of failure. Just like with SVB there should be some kind of insurance for large accounts. with various audit and other processes to keep things "safer"

JumpCrisscross 4y ago
> your an active or passive investor or not would probably depend on how much "work" you put into the partnership Legally, it requires paperwork filed ex ante. As the article notes, several states have DAO LLC constructs. DAOs that don't incorporate do, and should, expose their holders to unlimited liability. That is the default. (If you and I start an unincorporated car-washing business, and it destroys someone's car, we will be jointly sued and liable, though I may separately have individual claims against you if you made all the wrong decisions.) The situation all this seeks to avoid is profit-seeking enterprise having everyone who stood to gain when things went well standing up saying "not it" when things don't. If a DAO–or any other business or person–causes you injury, it shouldn't be your job to figure out who contributed to what degree.

zoklet-enjoyer 4y ago

Wyoming has a DAO LLC https://sos.wyo.gov/Business/Docs/DAOs_FAQs.pdf https://sos.wyo.gov/Business/Docs/DAOs_FAQs.pdf

pavlov 4y ago
Interesting law. It seems that this kind of DAO is a Wyoming LLC with all the existing obligations and the extra requirement that you have to file Wyoming paperwork if your smart contracts are modified: Articles of organization shall be amended when: (i) There is a change in the name of the decentralized autonomous organization; (ii) There is a false or erroneous statement in the articles of organization; or (iii) The decentralized autonomous organization's smart contracts have been updated or changed. A DAO may not be "foreign", but it's not defined what exactly that means: "The secretary of state shall not issue a certificate of authority for a foreign decentralized autonomous organization." I'm guessing that most DAOs don't want the legal liability of an American LLC, so there may not be a lot of takers.
- wsh 4y ago
  In context, “foreign” means an entity registered in another state or country. See the FAQ: Can I register my out-of-state DAO? No. A certificate of authority for a foreign DAO cannot be filed pursuant to W.S. 17-31-116.
  - rtkwe 4y ago
    What does that even mean for a DAO to be out of state? Is it based on people with voting power in the DAO?
    - houston_Euler 4y ago
      IANAL, but I believe it means that the company can't be headquartered somewhere else.
      - rtkwe 4y ago
        In terms of a pure DAO though that's a weirdly nebulous distinction. Before incorporation they're nowhere legally speaking, there's not a single physical location it's operating out of. Maybe like others have said it's mostly about otherwise extant orgs not being able to register.

the88doctor 4y ago

This case just confirmed what we already knew before: DAOs are just groups of people working together, and they don't get any special treatment just because they coordinate their activities via blockchain instead of email. Enforcement will be the interesting part. If a DAO has anonymous members and no LLC or corporate structure associated with it, then a court can rule that the members are liable, but it could be very difficult to enforce that liability.

AlexandrB 4y ago
Many of them don't even coordinate their activities via blockchain because it's too slow and expensive[1]. [1] https://www.banklesstimes.com/news/2023/03/08/off-chain-governance-strikes-a-chord-with-daos-as-77percent-of-them-favor-it-over-any-other-form/ https://www.banklesstimes.com/news/2023/03/08/off-chain-gove...
- zoklet-enjoyer 4y ago
  Governance activities are talked about on forums and chatrooms. Governance is voted on on-chain Edit: I'm posting too fast, so here's an edit for a reply I don't know anything about Ethereum DAOs. Check out Tendermint chains (Cosmos, Osmosis, Crescent, Stargaze, EVMOS, Kava). Gas is cheap and all voting is on-chain. Governance discussions happen mostly on a forum called Commonwealth and then they're put on chain and voted on by validators and stakers.
  - AlexandrB 4y ago
    Except when it's not: https://docs.decentraland.org/player/general/dao/overview/how-does-the-dao-work/ https://docs.decentraland.org/player/general/dao/overview/ho... > To circumvent the very high gas fees associated with full on-chain governance, Decentraland’s DAO uses a combination of free, off-chain voting for the community and a multi-sig wallet controlled by a “DAO Committee” to enact those off-chain decisions on the Ethereum blockchain. I'm not a huge follower of the crypto ecosystem and DAOs, but this kind of thing seems like it's pretty common.

user3939382 4y ago

Oh no https://en.wikipedia.org/wiki/Data_access_object https://en.wikipedia.org/wiki/Data_access_object

UncleEntity 4y ago

> And the question remains whether the court would reach a different result if it turns out that the named plaintiffs hold BZRX tokens. That could mean those plaintiffs are fatally conflicted from pursuing their claims, as they would effectively be both plaintiffs and defendants under their theory of the case. This is the part I don’t understand, if they succeed in making the case all “owners” are liable wouldn’t they equally be liable for the money they lost? And the thousand years to get paid back part — are you a hodl or not?

JumpCrisscross 4y ago
> wouldn’t they equally be liable for the money they lost They aren't equally liable, they are jointly and severally liable [1]. Equal liability implies a liability cap where there isn't one. [1] https://www.investopedia.com/terms/j/joint-and-several-liability.asp https://www.investopedia.com/terms/j/joint-and-several-liabi...

naikrovek 4y ago

dear Lord, I've been very good, mom said that she is thankful I helped her with housework and that my room has stayed very clean. as always, I donate all of my income to charity and volunteer for 40 hours every week. can I have one thing? just one thing? my one wish is to never have my day cluttered with f*king blockchain BS again. thank you

tiku 4y ago
Nah Blockchain is here to stay.

mr337 4y ago

I have been out of the loop of DAO and how they are organized and manage changes. My first explaining of that was in Folding Ideas part of Decentraland [1]. The DAO portion did not look so good. So still trying to figure out if this is just a phase or there is some legitimacy to a DAO. 1 - https://youtu.be/EiZhdpLXZ8Q?t=4923 https://youtu.be/EiZhdpLXZ8Q?t=4923

wilg 4y ago

My important and real DAO [1] is not worried about this [1] https://earth.cheap/ https://earth.cheap/

deleted 4y ago
[deleted]
nosequel 4y ago
Thanks for the laugh. I really hope you reach your goal of 5.3 quadrillion dollars.
deleted 4y ago
[deleted]

throwanma 4y ago

"... In The US"

a1371 4y ago

> The plaintiffs alleged they lost $1.7 million in the cyberattack and that the repayment plan would take thousands of years to make them whole Creative repayment plan. > the court focused on statements by the bZx Protocol developers that creation of a DAO would insulate the Protocol “from regulatory oversight and accountability for compliance with U.S. law Looks like they attempted the "citizen of the earth" card.

poof131 4y ago

Regulatory arbitrage in Web3 seems to be coming to and end. My assumption is 1) If your contract is upgradeable it isn’t decentralized. Might as well be hosting on EC2. 2) If a multi-sig runs your governance contract or treasury it isn’t decentralized. Might as well form an LLC or C corp. 3) From a more NatSec perspective, if a SEAL team or the FBI can reach a few people in your DAO and your project would shut down, you aren’t decentralized. Which all seems good and as it should be, to stop people LARPing as decentralized to avoid regulations.

rcme 4y ago
> 1) If your contract is upgradeable it isn’t decentralized. Might as well be hosting on EC2. One benefit of hosting on the blockchain is that you can build an arbitrary derivative on top of any blockchain object. It's harder to do that with something random running on EC2.

saurik 4y ago

I found another article by some lawyers that is interesting about this case: https://us.eversheds-sutherland.com/mobile/NewsCommentary/Legal-Alerts/250623/DAO-members-may-be-jointly-and-severally-liable-for-55-million-crypto-theft https://us.eversheds-sutherland.com/mobile/NewsCommentary/Le... What I find most fascinating is that most "DAOs" you see are entirely window dressing: at the end of the day, there are a few people who actually run the assets and control the code being run who are merely promising to take direction at the whim of the people who hold some token, which is effectively just an illegal way to build a corporation and sell stock. It is possible to do something that is actually run by a truly decentralized and autonomous mechanism but there are serious limits; like, if you are running things on just Ethereum you can write code that handles code upgrades by using an on-chain vote... but it would not be trivial (I won't say quite impossible) for the DAO holders to then vote to transition the system to Polygon somehow, as what would that mean from the perspective of the code running on Ethereum? Or like, you couldn't have the DAO on Ethereum do something as simple as own a .com domain name. This situation is in some sense no different for this DAO. They apparently had an actually-decentralized one on Ethereum, which is surprising as it is so rare... but, as mentioned in this article I found--and not in the article linked for this thread which is concentrating on the general partnership question--they cut corners when they decided to go multi-chain, and the DAO supposedly owned contracts on a couple other networks, including Polygon. The hack then wasn't "the DAO decided to use buggy code and now the DAO members are liable": it was a phishing attack against a single developer sitting on a single key that allowed for control of the code--and thereby the money--on Polygon, as the DAO was only really able to ask that developer to take action and then hope he did it. That extra context to me makes this whole thing even more of a fascinating case study. Like, one might then just want to say "this thing was never decentralized to begin with: the owner of the key was liable" and yet weirdly the case isn't brought merely against that developer... it is brought against the DAO that in some sense supposedly hired the developer and was negligent in letting the one developer have the key for all the money on another network, something they never should have done! In some sense, then, this is a remarkable win for the concept of a DAO. I mean, sure: some people likely wanted a DAO to be some kind of "regulatory arbitrage" (as noted in complaints about them here on Hacker News) and are going to be sad at the idea that the DAO holders actually have some kind of liability in the actions that the DAO takes... ...but that was NEVER--I am serious: NEVER--an informed take on a DAO. The point isn't to make it somehow impossible to sue the people who own it, it is to build a new form of organization wherein the ownership is liquid and people have a direct democracy over the actions of the organization. If someone sued a co-operative--a common form of company where the customers and/or employees are the owners; I have had numerous friends who lived in the local student housing co-op and I'm myself a member of the local food co-op--it would not be surprising or disappointing to me if all the people who were deemed owners had some potential liability. Now, I don't think the co-op holders (such as myself if my local food co-op does something bad, even though I absolutely am allowed to go to meetings and vote on their actions!) actually have much liability, but only because American corporate law is out of control on liability separation; like, I personally think big tech shareholders should have joint and several liability over the shit decisions these companies make that harm customers; but that (very sadly to me and I believe incorrectly) isn't how it tends to work in the United States... hell: the employees and even managers of the company taking the actions often don't have liability, which is just crazy-town. But so, OK: when I see this argument that the DAO can actually be a defendant and can actually have liability that can actually be shared among its owners, to me that is an almost-incredible vindication of the concept. Hell: apparently, the companies that were the original developers of this mess in fact were considered to NOT have liability anymore, having SUCCESSFULLY transferred that to the DAO? That's hilarious!! Now, does this mean it is a good idea to own "shares" in a DAO? Hell no ;P. And yeah: I'd like to think this would kill a lot of interest in holding a non-negligible quantity (as it can be hard to not own any, which is why this article focused on non-negligible) of the tokens for a DAO, in the same way I can't imagine many people would own stock in Apple if they could be held joint and severely liable (which maybe is actually going "too far"... we here in the US love our liability extremes ;P) for its actions.

Canada 4y ago

What would happen in the case of a general partnership where 5 people put some money together to buy a house for $1M: Partner 1: $500,000 Partner 2: $250,000 Partner 3: $249,000 Partner 4: $999 Partner 5: $1 They issued paper receipts representing these proportions. All agreed that any rent collected would be paid to the paper holders Pro rata. All parties have to show up to review/approve/reject a tenant, and all have to show up to collect the rent on the due day. Each person writes their own receipts and signs all the others, so no one party is more in charge than any other. Partner 3 sells 100,000 receipts to someone else, we'll call Person A, for $101,000. Then the house burns down and is lost, so there's not going to be any rental income now and nobody is interested in buying the receipts anymore. None of the parties did anything to cause the fire. Now who can sue successfully? (Not saying the facts of the case in the article match my hypothetical exactly.)

vkou 4y ago
> Now who can sue successfully? Nobody? All I see is six morons that have joint ownership in a house that were all too cheap to pay for insurance. And since nobody's at fault for the fire, tough cheese. Person A might be able to sue whomever sold him the receipts, but only if he was lied to about how the organization functions.
deleted 4y ago
[deleted]
gamblor956 4y ago
This is a pretty standard partnership issue. In your scenario, nobody's at fault for anything, so nobody can sue anybody. But what if Partner 2 set fire to the house? Then the other Partners (now including Person A but not Partner 3) could sue Partner 2 for losses. Or what if Person B, a tenant, suffered harm due to negligent maintenance of the house? Person B could sue any or all of the Partners (now including Person A but not Partner 3) for damages. And each partner would be "jointly and severally" liable for all of Person B's damages (so if Partner 5, owning a tiny portion of the partnership ended up getting sued and owing damages to Person B, they would need to sue the other partners for reimbursement). But note that Partner 3 selling his partnership interest to Person A would, in many states, trigger the dissolution of the original partnership. In this case, it doesn't matter since they never bothered to form any custom organization documents or financial allocations.

olliej 4y ago

Why do people think "doing the same as X but 'with blockchain' instead of paper" means "legally different from X"? If doing X is illegal, adding blockchain to it doesn't magically mean you're not doing X. If doing X means you have to pay taxes, doing X with linked lists doesn't mean you don't have to pay taxes. If doing X means you have a bunch of liabilities, then doing X on a block chain means you have a bunch of liabilities. The only thing that makes a DAO different from a partnership is that decision making is arguably public on the blockchain, instead of an email thread. Again, why would you think that doing it on a blockchain makes it different from email, or in person, or whatever. Now in fairness, I certainly didn't think of DAOs as being an unlimited partnership, but that's largely because I didn't think about it because they seem fairly pointless. As the court seems to be saying a DAO is fairly clearly a partnership, and they very deliberately terminated the LLC and didn't create an LLP, so the lack of liability protection follows logically from that.

zeryx 4y ago

DAOs require a legal identity, otherwise one will be provided. For anyone who has been thinking about the intersections between DAOs and the law, this was obvious. You can still manage your membership on chain, and there are plenty of great structures that are more DAO friendly - my organization uses a MI LLC structure (midao.org is what we used)