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The state created a statue dubbed DUNA–the Decentralized Unincorporated Nonprofit Association.
A landmark bill passed in Wyoming, expanding the already friendly legal waters for decentralized autonomous organizations (DAOs) in the state.
The new bill, which was approved on March 7, will provide a legal framework for DAOs to enter into legal contracts with third parties, allow them to pay taxes, and provide the organizations with limited liability–a term that offers protection for shareholders and stakeholders.
The act will go into effect on June 1.
Decentralized autonomous organizations are meant to coordinate global, digital communities around a common project or goal. They often use web3 tools, including token-based governance and smart contracts to inscribe rules and execute decisions.
Positive Reception
Experts across the industry are lauding the DUNA act.
Connor Spelliscy, executive director of the DAO Research Collective told The Defiant they are “huge fans” of DUNA, as it represents a major step forward in providing DAO founding teams with clear direction legal compliance.
He signaled that “one of the biggest, if not the biggest,” hurdles for blockchain founders is a lack of legal clarity, and DUNA provides a much-needed template moving forward.
His views echoed those of Preston Byrne, legal counsel for Brown Rudnick law firm, who analyzed the DUNA act. Drafters get “two thumbs up” by writing a bill much more closely aligned to crypto-native applications, he said.
Wyoming’s First Attempt
Wyoming has been on a mission to become the “Delaware of Digital Assets.”
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With that mission in mind, in April, 2021, Governor Mark Gordon–the same person that enacted last week’s DUNA act–inked a bill that would legally address DAOs’ situation in the state.
SF38, as that initiative was labeled, addressed concerns around limited liability, a concept that gets a bit murky when it comes to DAOs, given their decentralized nature.
Limited liability companies (LLCs) act as a hybrid that marries the pass-through taxation of a partnership or sole proprietorship (i.e. they don’t pay corporate tax) with the limited liability of a corporation (i.e. when a business fails, personal assets of the owner of the organization are protected).
That legislation limited the individual liability and specified whether the code or the paperwork filed with the state would take precedence, creating procedural clarity for projects.
Two Thumbs Up
Byrne recognized on March 8 he was “not a fan” of Wyoming’s first attempt at passing a DAO law.
The issue, said Byrne, with Wyoming’s earlier law is that it was “basically a rebadged member-managed LLC.” Last week’s DUNA “looks like” it fixed all that by introducing a few new concepts.
New concepts include better definitions around how the law handles smart-contract governance mechanisms, and helping confer membership through the sale of tokens, among others.
Byrne said he never thought he’d see a government enact a law of this sort during his lifetime, claiming the DUNA drafters are quite familiar with code problems the smart contract community has been dealing with since the 1990s.
Spelliscy, on the other hand, is cautiously celebrating. “Like other frameworks that have been developed in the space, this isn’t a solution for everyone,” he said, adding that the industry will still require further legal clarity at a federal level.
Still, Byrne urged crypto advocates to enjoy the moment.
“We lawyers should celebrate nonetheless, for two reasons – (a) if this catches on, it’ll generate gigatons of corporate legal work in crypto and (b) there is nothing more exciting than the creation of truly new law,” wrote Byrne.
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