Senate Committee Approves Wyoming Bill; One Step Closer to Giving DAO Legal Standing
Wyoming ranks as one of the most forward-thinking states in developing and improving legislation on a blockchain. Once again, the state aims to make history in this regard as the Senate committee approved a bill recognizing decentralized autonomous organizations, or popularly known as DAOs, as companies.
The law is currently in Wyoming’s House of Representatives and, if passed without amendments, will become the first state to recognize decentralized governance systems.
DAOs employ decentralized governance using smart contracts. These platforms function without a hierarchy, whereby everyone on the platform has equal control over the decisions and voting processes. According to OpenLaw’s Aaron Wright, who was involved in drafting the bill, the law, if implemented, will boost the overall participation of DAOs in the state. He tweeted,
“Well-intentioned DAO creators will have tremendous freedom to structure their affairs using any mix of statutory filings, legal agreements, or smart contracts to organize.”
“This flexibility will give folks the ability to play with governance and DAO structuring productively.”
This will also add legitimacy to these DAOs and cryptocurrency projects, allowing them to operate as Limited Liability Companies (LLCs). However, the bill still has some straightening on pertinent issues around cryptocurrencies and blockchains, Wright said.
Issues surrounding the DAO's interests, their tokens, and whether their tokens classify as securities need to be solved before they can be passed to law.
Preston Bryne, partner at Anderson Kill Law and a member at Adam Smith Institute, however, called for the bill to be scrapped as it could encourage scam companies' formation. In a short thread on Twitter, Bryne wrote,
“Wyoming; scrap this bill. “DAO” is language long used by token hawkers to justify selling shitcoins and half-baked code. They don’t incorporate an LLC because they don’t want to KYC their members and be responsible for what the DAOs do. Don’t enable this behavior.”
He further explains that DAOs do not need to be licensed companies due to management issues that arise from voters being anonymous.
“Companies are supposed to be made up of and managed by people. They exist to protect people working in concert.”
“DAOs, at least to date, protect their members by obfuscation and anonymity. The state doesn’t need to step in here to grant them a corporate veil.”