- Lido DAO is now recognized as a general partnership, setting a new legal precedent for profit-driven DAOs.
- The court ruling holds Lido DAO participants liable, even with minimal involvement, such as posting on forums.
- Big investors like a16z and Dragonfly are implicated as general partners in Lido DAO’s governance.
On Monday, a US federal judge ordered that Lido DAO, the group behind one of the most popular liquid staking systems, be recognized as a general partnership under state law. This is a landmark decision regarding the legal status of DAOs, particularly those that are profit-making entities.
Source: Samuels Vs. Lido DAO- courtlistener.com
The court also dismissed Lido’s submission that, by law, he was not a legal person. Rather, he concluded that the DAO could be a general partnership. This decision creates a new standard for DAOs in the financial industry.
Lido DAO Liability Clarified
The court also said that the persons involved in managing Lidos operations were legally liable. These participants cannot escape responsibility by invoking the DAO’s decentralized structure. From the United States Northern District Court of California, it is established that core members of the protocol were actively participating in its management. Judge Vince Chhabria Stated:
“The lawsuit presents several new and important questions about the ability of people in the crypto world to inoculate themselves from liability by creating novel legal arrangements to profit from exotic financial instruments.”
The case has also raised questions about some of the big investors in Lido. Paradigm Operations, Andreessen Horowitz (a16z), and Dragonfly Digital Management were named as general partners. They were associated with the DAOs’ management and control. Nevertheless, Robot Ventures, another investor of Lido, was excluded from the case. There was no sufficient proof that they were involved in governance processes
Miles Jennings, general counsel at a16z Crypto, reacted to the decision. He described the ruling as a “big setback to the concept of devolved governance ” and said it could be a very dangerous trend. As Jennings noted, engaging with a DAO, even on a relatively low level, might result in legal consequences for the DAO members. This may range from something as basic as posting on a forum.
This could alter how DAOs are formed, managed, and governed in the future. It also presents questions over the future of Decentralized Finance (DeFi). In the future, how other courts approach similar cases and address the subject of profit-oriented DAOs would be closely watched.
