Wyoming passes bill providing legal framework for DAO

Key Takeaways

The bill passed 50 to 10 in the House of Representatives with bipartisan support.

The law details the requirements for DUNA formation and outlines the role of smart contracts.

Wyoming Governor Mark Gordon has signed landmark legislation that lays the foundation for the establishment and management of decentralized autonomous organizations (DAOs). This move marks a significant step forward in New York State’s embrace of blockchain technology.

The bill, known as the Decentralized Unincorporated Nonprofit Association Act, passed the Wyoming House of Representatives on Monday with broad support, 50-10. It was sponsored by the Legislature’s Select Committee on Blockchain, Financial Technology and Digital Innovation, which aims to provide a structured framework for DAO operations.

The new law, which will come into effect on July 1, 2024, allows DAOs with at least 100 members to become unincorporated non-profit associations. The bill outlines specific requirements for forming DUNA and further clarifies the role of smart contracts.

A key feature of the bill is that it recognizes DUNA as a separate legal entity from its members. This means that individual members are shielded from liability for violations of association agreements, allowing the DAO to enter into contracts with third parties, open bank accounts, pay taxes, and fulfill reporting requirements.

Unlike traditional organizations with centralized leadership, DAOs operate through a decentralized decision-making process facilitated by blockchain technology. This decentralized approach allows DAOs to function without central control, with governance governed by a set of rules enforced by the blockchain.

The new law also allows DAOs registered as non-profit organizations to engage in for-profit activities as long as the proceeds are used to further the non-profit organization’s goals. DAOs are also granted the ability to acquire and transfer property, including tokens, to facilitate their operations.

In response to the bill, venture capital firm a16zcrypto hailed it as a major breakthrough. Miles Jennings, general counsel at a16z Crypto, emphasized that recognizing DAOs as decentralized unincorporated non-profit associations (DUNA) provides much-needed protection and supports the spirit of web3 while providing cash flow for digital asset holders.

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