Wyoming To Recognize DAOs As Limited Liability Companies This July

Wyoming is set to recognize decentralized autonomous organizations (DAOs) as a new type of limited liability companies starting July 1, potentially paving the way for accelerated adoption of its stance in other states across the US. The state’s bill will allow extending both state and federal recognition to DAOs, similarly to those enjoyed by other businesses.

The latest development was welcomed by Caitlin Long, CEO and Founder of forthcoming digital asset-focused bank Avanti, who praised Wyoming’s authorities for building on the state’s history of “inventing the LLC, which all other states followed roughly a decade later.”

Sponsored by Wyoming’s Select Committee on Blockchain, Financial Technology and Digital Innovation Technology, the bill was passed in March by Wyoming’s State Senate, following which it was submitted to the Wyoming House of Representatives. Once the lower chamber of Wyoming’s legislature approved the bill, it was submitted to the state’s governor.

“What problem does Wyoming’s DAO law solve? It’s the prob of joint-&-several liability for all participants in a DAO, if the DAO were ever deemed by a court to be a general partnership. [The] new law handles this by applying LLC liab[ility] protections to DAOs that meet the requirements,” Long said.

Avanti’s CEO noted that the key feature of the bill “is that, unlike regular LLCs, Wyoming Secretary of State can yank the liability protection from a DAO that commits fraud or engages illegal activities (unlike with a regular LLC). So, only use this law for valid projects & get counsel—it won’t be useful for invalid ones.”

Aaron Wright, Professor at Cardozo Law School, commented on the development by saying “DAOs are officially a thing.”

They “are subreddits with bank accounts and governance. ETH and Web3 will encourage positive forms of coordination, not just shitposting and mobs,” he added.