Thread by @boironattorney

Although the Wyoming DAO bill that @AWright01 helped draft is imperfect, I disagree with the framing by @lex_node, @prestonjbyrne and @stephendpalley. I feel this way mainly because it solves a huge issue: unlimited liability of DAO members. Thread on the good and the bad 👇

1. Good: DAOs currently operate without regard to the possibility of being general partners in a general partnership for US law purposes, making each of them liable for the actions of each other one. This is a particular risk with a DAO consisting of only a few members.

2. Alternatively, there is no general partnership, but each individual is still liable for his or her own actions. The Wyoming DAO bill would eliminate this risk by wrapping a shell of limited liability around the DAO members.

3. This can already be done with existing LLCs but not as easy as this bill contemplates. This should be viewed as a huge win and great development. In the meantime, DAO members, especially when a small group of multi-sig holders, please form an entity out of which you act!

4. The Wyoming DAO bill would now give a realistic way for a DAO to sign documents, open a bank account, etc. This ties in very closely with the limited liability point above but is currently a struggle for many DAOs. A solution that reduces risk is meaningful.

5. Code is law is not a real thing until law actually makes code law. I’m being a little hyperbolic but that is effectively what the Wyoming DAO bill does to allow the DAO governance contracts to be binding and thus enforced under actual laws.

6. That doesn’t mean there cannot be disputes, though they should be able to be resolved with reference to the governance code. It’ll be messy at first for sure.

7. Bad: An algorithmically managed DAO should not exist at all. This isn’t a real thing. Having the operating agreement in the form of code works but not the entire management of the DAO. This is the main gripe for people like @lex_node and @prestonjbyrne, and they are right.

8. Some of the definitions are quite poor: “decentralized autonomous organization” should not be defined as an LLC; “smart contract” should not be defined as an “automated transaction”;

9. “membership interest” is defined but then used and explained in ways that make it unclear whether the membership interest is a member’s entire ownership (i.e., equals 1) or is the sum of its ownership (i.e., equals x number of membership interests); and there are more...

10. The calculation of a membership interest is tied to a member’s digital assets transferred to the DAO. It also should contemplate fiat or other property transfers as contributions. It is unnecessarily narrow.

11. I get the point is to keep everything on-chain with that approach but it will create issues because nobody will realize this is a requirement and will mess it up. Guaranteed disputes if this remains.

12. This feels like a bolt-on (which it is) to existing LLC laws. It’s kind of the easy way out and makes for efficient drafting. But, this is complex. Trying to harmonize the existing LLC law with this bolt-on likely will be tricky in many instances.

13. Overall, I think the bad can be addressed. Some of it really needs to go away (algorithmically managed DAOs), some of it would take a lot of work (completely separate law from existing LLC laws), and other things are quite easy with the right input (definitions).