Wyoming has recently passed a groundbreaking law that officially acknowledges blockchain-based Decentralized Autonomous Organizations (DAOs) as legal entities. The legislation, known as the Decentralized Unincorporated Nonprofit Association Act (DUNA), was signed into law by the state's Governor on March 7 and is set to take effect on July 1.

While the bill does not explicitly mention DAOs, it outlines the framework for eligible nonprofit organizations to establish governance structures utilizing distributed ledger technology (DLT), such as blockchain, digital assets, and smart contracts. DAOs leverage these systems to facilitate community voting on governance matters, ensuring transparency and decentralized decision-making.

One key aspect highlighted in the legislation is the transferability of membership interests and voting rights among individuals within DAOs. Typically, DAOs utilize transferable crypto tokens to enable members to participate in the voting process, fostering a democratic and inclusive approach to governance.

The crypto industry has responded positively to Wyoming's progressive stance on DAOs, with a16z, a division of Andreessen Horowitz, commending the state's initiative. They expressed their support for Wyoming's approach, indicating that it is likely to set a new standard for blockchain networks operating in the United States. Additionally, Coinbase's chief legal officer, Paul Grewal, emphasized the importance of states like Wyoming in driving innovation and providing inspiration for decentralized structures.

Renowned crypto-focused lawyer Preston Byrne lauded Wyoming's updated law as a significant improvement over its previous attempt at regulating DAOs. Unlike the earlier legislation that treated DAOs as member-managed Limited Liability Companies (LLCs), the new law recognizes the unique characteristics of DAOs and their distinct operational requirements. This shift marks a departure from the traditional LLC model and addresses the challenges faced by DAOs, particularly in complying with financial and regulatory standards.

In contrast to states like Vermont and Tennessee, which still classify DAOs as LLCs, Wyoming's forward-thinking legislation aligns with the evolving nature of decentralized organizations. By accommodating the specific needs and functionalities of DAOs, the new law provides clarity on the permissible activities and operations of these innovative entities, paving the way for a more conducive regulatory environment for blockchain-based initiatives.