Note: This piece is co-authored by me and Brooklyn Law School student Sydney Abualy. INTRO Let’s talk about the ‘Wyoming DAO Law’ that has been receiving much attention. Designed as a supplement to Wyoming’s Limited Liability Company Act, “Bill 38” is pending passage in the Wyoming state legislature and seeks to enable “the formation and management of decentralized autonomous organizations” by allowing DAOs to become franchise-tax-paying LLCs chartered by the State of Wyoming. Although the authors support the use of smart contracts by traditional business entities (one of the authors helped found a prominent ‘venture DAO’ that is organized under a Delaware LLC), we believe Bill 38 rests on fundamental misunderstandings of how corporate and contract law relate to one another and of the functions and benefits of blockchain-based smart contracts. Furthermore, by equating DAOs to state-chartered entities, Bill 38 implicitly colonializes the anarchist concept of “DAOs” to facilitate re-intermediation and rent extraction by TradFi intermediaries such as lawyers, registered agents, and secretaries of state. The approach is unsound legally, technically and culturally, and should be rejected by Wyoming’s legislature and the people of Wyoming whom the legislature represents.
Anyway we can get this opened up for sharing or perhaps issued on another forum (maybe lexdaoism) after some time. The circular positive platitude sharing about the DAO law without objective criticism is making me naseous.
For us, the existing LLC structure (formed in NV, registered in CA) probably works just fine. At the very least I welcome WY legislature to continue to give DAOs the needed spotlight. Although their approach is flawed and puts unnecessary burdens on the members and managers, I appreciate that they are at least trying to keep WY relevant.
You hit the nail on the head here: "A normal LLC’s operating agreement can easily require that members use a smart contract to perform various functions such as escrowing funds, issuing membership interests and counting votes. It can even provide that the results of the smart contract will be final and binding under most conditions. An example of such a “qualified code deference” approach, which relies purely on normal LLC law and contract law, can be found at https://raw.githubusercontent.com/metacartel/MCV/master/Legal/Grimoire%20and%20Exhibits/MCV-Grimoire-Final-All-Exhihbits.pdf."
Thanks Gabriel for another great newsletter.
Ha, tell us how you really feel. Great post and it does appear that this is worse than nothing at all, unfortunately.