Wyoming has become the first state in the USA to address the legalities of Decentralized Autonomous Organizations, otherwise known as DAOs.
If other states follow in Wyoming’s footsteps, this could pave the way for industry-wide acceptance of how to integrate the DAO organizational structure that is so popular in Ethereum and DeFi developer communities.
Wyoming Governor Mark Gordon signed bill SF0038 into law on April 21, 2021 and the bill became effective later that year on July 1, 2021.
The bill allows for DAOs to exist as a special type of LLC, or Limited Liability Corporation. It also allows for existing LLCs to elect to become a DAO. In order to be registered as a DAO LLC, the bill requires, among other things, the following:
- Registration of Smart Contract addresses
- Statement on how the DAO is governed, including the extent to which any governance is automated.
- Election of “member managed” or “algorithmically managed”
- “DAO LLC” must be included in the title of the organization
What advantage is there from registering as a DAO LLC instead of simply an LLC? One reason may be in membership responsibilities. In a DAO, members do not necessarily have a fiduciary responsibility to the LLC.
One important note is that DAOs may only be formed for lawful activities, and the bill allows the Secretary of State to dissolve the DAO LLC if it is determined to no longer serve a lawful purpose.
The full text of Wyoming’s DAO law may be found here: https://www.wyoleg.gov/Legislation/2021/SF0038
Some Frequently Asked Questions on Wyoming’s DAO LLC can be found here: https://sos.wyo.gov/Business/Docs/DAOs_FAQs.pdf