Disclaimer: In no way should this be construed as legal or tax advice. Unless you enjoy being subpoenaed, you should definitely talk to a real lawyer

What I Wish I Knew Before Talking to Lawyers about DAOs

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Style Pass

2021-10-27 02:00:07

Disclaimer: In no way should this be construed as legal or tax advice. Unless you enjoy being subpoenaed, you should definitely talk to a real lawyer ASAP.

Over the past few weeks, I’ve spent dozens of hours talking to lawyers and getting actual legal advice, and the only thing they all agree on is this: DAOs are a legal grey zone. There is no playbook for creating a legally compliant DAO, and there probably won’t be for some time yet. Token issuance is itself a murky subject, but when you combine it with decentralized governance an extra dose of murkiness is added. Everyone is just experimenting and waiting to see how regulators react. So take everything mentioned here with a heavy dose of salt.

Two core concepts to mention going into this are Legal Liability and Tax Protection. The first is obvious - if you are setting up a DAO, neither you nor the actual members of the DAO should be putting themselves in any legal jeopardy. The second is more nuanced - your DAO should pay taxes somewhere. If you don’t, your local jurisdiction may come after the DAO itself. If you’re looking to avoid paying taxes altogether, you can stop reading right now.

With the disclaimer and the basic concepts out of the way, here’s what I wish I knew before talking to lawyers about setting up a DAO: