According to (Decrypt) reports, a U.S. federal court judge ruled on Monday that Lido DAO (the governance organization of the liquidity staking protocol Lido) can be considered a general partnership under state law and that identifiable participants are managing the operations of Lido DAO, thus cannot evade responsibility through its decentralized structure.
The court dismissed Lido's claim that it is not a legal entity, classifying it as a general partnership and setting a precedent for how profit-oriented decentralized autonomous organizations (DAOs) should be viewed.
Judge Vince Chhabria wrote in his ruling: "(This lawsuit) raises several new important questions about whether people in the crypto space can exempt themselves from liability by creating new types of legal arrangements to profit from specific financial instruments."
Venture capital firms such as Paradigm Operations, Andreessen Horowitz (a16z), and Dragonfly Digital Management were implicated as general partners for allegedly actively participating in Lido's governance and operations, while one of Lido's investors, Robot Ventures, was exonerated of related liabilities due to insufficient charges of active involvement.
Miles Jennings, the chief legal officer and head of decentralization at a16z crypto, said on social media platform X that Judge Chhabria's ruling "deals a significant blow to decentralized governance," and he continued writing:
"According to this ruling, any participation in a DAO (even just posting in a forum) may be sufficient to hold DAO members liable for the actions of other members under general partnership laws."
Today, a California judge dealt a huge blow to decentralized governance. Under the ruling, any DAO participation (even posting in a forum) could be sufficient to hold DAO members liable for the actions of other members under general partnership laws. It's time to DUNA. pic.twitter.com/aKNBY7pfc9
— miles jennings (@milesjennings) November 19, 2024
According to court documents, plaintiff Andrew Samuels purchased Lido's native token LDO on the secondary market through the Gemini exchange between April and May 2023. By December of the same year, Samuels filed a class-action lawsuit after incurring losses, alleging that these tokens were sold to him as unregistered securities and holding Lido DAO responsible for their decline in value.
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