A U.S. federal judge has ruled that participants in decentralized autonomous organizations (DAOs) can be held accountable for the actions of other members under state partnership laws.
Court Ruling on DAO
On November 18, Judge Vince Chhabria of the U.S. District Court for the Northern District of California determined that Lido DAO qualifies as a general partnership under California law, making its members liable for the organization’s actions.
Liability of Lido DAO Members
The ruling arose from a lawsuit filed by Andrew Samuels, who purchased tokens issued by Lido DAO. Samuels alleged that the tokens were unregistered securities and claimed that Lido DAO should have registered them with the U.S. Securities and Exchange Commission. The court ruled that Samuels sufficiently alleged that Lido DAO and its identifiable partners could not avoid liability.
Impact on Decentralized Governance
Miles Jennings, general counsel at a16z Crypto, called the ruling a "huge blow" to decentralized governance. He warned that under the judgment, even minimal participation, such as posting in forums, could expose DAO members to liability for the actions of other members. This landmark case could significantly impact the governance and legal accountability of DAOs moving forward.
The court's decision sets a new precedent for DAOs and could dramatically alter approaches to governance and legal responsibility in this area.
