The governor of Wyoming, Mark Gordon, has given his approval to a bill that establishes a legal framework for the creation and management of decentralized autonomous organizations (DAOs). This bill, which was sponsored by the legislature’s special committee on blockchain, financial technology, and digital innovation, introduces a legal status for decentralized unincorporated nonprofit associations (DUNAs) based in the state.
The document, enacted on March 7, outlines the requirements for forming a DUNA, details the roles of smart contracts, and provides provisions for the legal responsibilities of the association and its members. Under the new law, a DUNA is considered a separate legal entity from its members, meaning that the DAO itself can be held liable without implicating its individual members.
A DAO is an entity that operates without central leadership, relying on a community governed by a set of rules enforced by a blockchain. Granting legal recognition to a DAO allows it to enter into contracts with third parties, open bank accounts, pay taxes, and fulfill informational reporting requirements.
Regarding the nonprofit status of DAOs, venture capital firm a16zcrypto clarified on March 8 that there is a “fundamental misunderstanding” about the designation provided by the new law. According to Miles Jennings, general counsel at a16z, and David Kerr, principal at Cowrie LLC, a Wyoming-based DAO is not prohibited from engaging in for-profit activities. The analysis also stated that DAOs are permitted to compensate their members, including in exchange for participation in the governance process. This approach by Wyoming supports the web3 ethos while still allowing digital asset holders to receive cash flows, marking a significant breakthrough.