Crypto-Friendly Wyoming Officially Gives DAOs Legal Status as LLCs, Effective July 1st

Just last month, the crypto-forward state passed a bill entitled Decentralized Autonomous Organizations Supplement that clarifies the legal status of DAOs, becoming the first state in the US to do so.

A DAO is an organization managed by rules encoded as a computer program, including automated smart contracts that automate organizational governance and decision-making.

Wyoming aims to give DAOs a legal status as limited liability companies but says that for DAOs to achieve mass adoption, technical limitations need to be addressed.

Last month, the bill was passed by the senate and introduced to the House of Representatives. Now, Wyoming has made history.

Wyoming’s DAO law solves the problem of joint-&-several liability for all participants in a DAO. If the DAO were ever deemed by a court to be a general partnership, new law handles this by applying LLC liability protections to DAOs that meet the requirements, said Caitlin Long, founder, and CEO of Avanti Trust and Bank.

The key here is that, unlike regular LLCs, the Wyoming Secretary of State can yank the liability protection from a DAO that commits fraud or engages in illegal activities, unlike with a regular LLC; as such, it is only useful for valid DAOs, she added.

This is not the first time Wyoming is leading in the regulation of digital assets. The state has awarded its special-purpose depository institution (SPDI) charter to two digital asset companies Avanti Bank and Kraken Bank.

Besides passing 23 blockchain-enabling laws, Wyoming gave Bitcoin, Ether, and other cryptos clear legal protection as property under commercial law.

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