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ARTICLE · 13 MARCH 2025

DAOs And Legal Risk: How Courts May Classify Token-Holders As General Partners

Caldwell Law
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Decentralized Autonomous Organizations (DAOs) are organizations managed by decentralized computer programs and governed according to votes by governance token-holders using decentralized ledgers (e.g., Blockchain).

United StatesTechnology
Charles Dresser
Charles Dresser
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DAO Background

Decentralized Autonomous Organizations (DAOs) are organizations managed by decentralized computer programs and governed according to votes by governance token-holders using decentralized ledgers (e.g., Blockchain). DAO members contribute cryptocurrency (e.g., Bitcoin) and stablecoins (e.g., Tether) in exchange for DAO-specific governance tokens. Some DAOs have been organized to seek profits, for instance, by investing member contributions in early-stage businesses (as venture capital firms do) or crypto staking (i.e., earning passive income by locking principal cryptocurrency to a blockchain network).

DAOs offer a new way to organize, using cryptocurrency and Web3.0. But, if a DAO is profit-seeking, it is likely to be considered the oldest, and most risky, form of a business organization, under the law.

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