A recent court ruling has classified Lido DAO, the governing body behind the popular liquid staking protocol, as a general partnership under state law. This decision was made in response to a lawsuit filed by plaintiff Andrew Samuels, who incurred losses from purchasing Lido’s native LDO tokens. The court rejected Lido’s claim that it isn’t a legal entity and set a precedent for how profit-driven DAOs are treated.
Identifiable participants were found to be managing the DAO’s operations and, therefore, could not evade liability through its decentralized structure. The ruling has raised concerns about the implications for decentralized governance in the crypto world. With this ruling, any DAO participation could potentially hold members liable for the actions of other members under general partnership laws.
The decision has been criticized as a “huge blow to decentralized governance” by General Counsel and Head of Decentralization at a16z crypto, Miles Jennings. This ruling could have far-reaching implications for other DAOs and the crypto world as a whole, with potentially significant consequences for decentralized governance and the regulation of decentralized finance (DeFi) platforms.
As a result, the crypto industry will be closely watching how this ruling is applied and interpreted in future cases.
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