A California federal court delivered a landmark ruling today that could reshape the landscape of decentralized autonomous organizations (DAOs). The court determined that Lido DAO, which oversees the Lido liquid staking protocol, qualifies as a general partnership under California law.
The ruling came in response to a lawsuit filed by Andrew Samuels, an investor holding Lido DAO's native LDO tokens. Samuels argued that these tokens should be classified as unregistered securities.
U.S. Judge Vince Chhabria's decision establishes that Lido DAO members could face legal liability for the organization's activities. This extends beyond just token holders to anyone participating in the DAO, including those who simply post in discussion forums.
The ruling has sparked concern across the cryptocurrency industry. Miles Jennings, an advisor at venture capital firm Andreessen Horowitz (a16z), described it as a major setback for decentralized governance. The decision challenges the common belief that decentralized structures operate outside traditional legal frameworks.
Several prominent investment firms, including a16z, Dolphin, Paradigm, and Dragonfly, were mentioned in the ruling due to their involvement with Lido DAO.
This precedent-setting decision could have far-reaching implications for other DAOs and their participants, potentially requiring these organizations to reassess their operational structures and governance models to address legal liability concerns.
The ruling underscores the evolving regulatory landscape surrounding decentralized organizations and may prompt other DAOs to seek clearer legal frameworks for their operations.