Wyoming will recognize DAO as legal entity under newly passed bill

The bill recognizes the blockchain-related aspects of DAOs and has attracted favorable comments from several members of the crypto industry.

Wyoming passed a law recognizing decentralized autonomous organizations (DAOs) based on blockchain technology as legal entities.

The bill, called the Decentralized Nonprofit Association Act (DUNA), was signed by the governor on March 7 and will go into effect on July 1.

The content of the bill does not involve DAO in detail, but emphasizes how non-profit organizations can use distributed ledger technology (DLT) to build a governance system based on blockchain, digital assets and smart contracts, in line with Tiebo's regulations. These systems can power DAOs, enabling them to conduct governance proposals through community voting.

The bill also states that membership rights and voting rights should be freely transferable between individuals. DAOs typically achieve this by leveraging transferable cryptographic tokens, which are traded during the voting process.

Crypto Industry Response

The Wyoming law drew praise from a16z, a unit of well-known venture capital firm Andreessen Horowitz.

a16z told reporters in a statement that they will support all portfolio companies using decentralized structures to register in Wyoming and require eligible companies to comply with this requirement.

The company added that Wyoming’s approach “could become the industry standard for blockchain networks being built in the United States.”

Meanwhile, Coinbase chief legal officer Paul Grewal said states like Wyoming are “a critical source of innovation and inspiration.”

He added that this shows that individual state laws allow decentralization and legislation to coexist.

Ending the Limited Liability Company Model

Cryptocurrency-focused attorney Preston Byrne calls Wyoming’s updated law “much better” than the state’s previous attempt at DAO legislation, which did not fully recognize the cryptocurrency-related aspects of DAOs and instead treated them as member-governed LLC (limited liability company).

Vermont and Tennessee continue to treat DAOs as limited liability companies, similar to Wyoming's previous model, while other U.S. states do not have any similar legislation in effect.

Abandoning the LLC model is critical because DAOs are often made up of anonymous members and are very different from traditional businesses. This limitation affects their ability to comply with financial and regulatory requirements. Wyoming’s latest law now accommodates these differences and comprehensively regulates the relevant activities that DAOs can engage in.

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