Legal misconceptions surrounding DAOs: five to look out for

August 23, 2023
Yuliya Prokopyshyn


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Decentralised autonomous organisations (DAOs) have risen in prominence over the last decade,  enabling the rapid growth of blockchain technologies. Associate Yuliya Prokopyshyn debunks five key fallacies around DAOs:  

1. DAOs exist in a legal vacuum

While DAOs challenge traditional legal concepts, they don’t operate in a legal vacuum. Similar to the metaverse, regulators are actively exploring ways to integrate DAOs into existing frameworks, as well as establish new rules specifically relating to DAOs.

2. DAO tokens are securities

️Even though some DAO tokens may be categorised as securities, this doesn’t apply to all of them. Seeking legal advice early in a DAO’s development is crucial to address regulatory concerns about its tokens and overall structure.

3. DAO participants don’t have personal liability

Contrary to common belief, many regulators treat DAOs as partnerships, potentially holding participants personally responsible for the actions of the DAO. However, this might evolve in the future, so keep an eye on this space.

4. DAOs are completely decentralised  

Despite their name, most DAOs aren’t entirely decentralised. While smart contracts and consensus mechanisms distribute power to some extent, certain points of control still exist, leading to additional legal complexities.

5. DAOs are exempt from local laws

Due to their decentralised nature, DAOs extend across borders, leading to jurisdictional challenges. Although efforts are being made to address cross-border legal aspects, DAOs must still adhere to relevant international and local laws. Remember that DAOs and associated technologies are evolving rapidly️ and their legal treatment will likely evolve as well.

Find out more about Yuliya and her practice here, or discover our full crypto team here.