¶ 1901
Overview
Scope of the chapter. This chapter examines the decentralized autonomous organization that operates without a statutory wrapper: the group of token holders, developers, delegates and investors who govern a protocol, a treasury or both through on-chain and off-chain voting, and who have formed no corporation, limited liability company, foundation or other entity recognized by statute. It asks what such a group is in law, who belongs to it, who answers for its debts, how it may be sued and served and how it is taxed. Chapter 1 introduced the subject at ¶ 160 and identified the partnership exposure in a single paragraph. See supra ¶ 160.03. This chapter carries that analysis through the decided cases, the partnership and association statutes on which they rest, and the procedural and tax rules that follow from them. The statutory wrappers are the subject of the next two chapters: purpose trusts and foundations in ch. 18, and the DAO limited liability companies of Wyoming, the Marshall Islands and Utah in ch. 20.
The problem stated. A DAO is usually described by its participants as software, a community or a protocol. Courts asked to decide whether a DAO can be sued have looked past those descriptions to the people who hold and vote the governance tokens, who hold the keys to the treasury, who are paid from it and who decide what the protocol will do. When those people have carried on a business together for profit and have not chosen a statutory form, the default rules of the partnership statutes apply to them, and those rules make each partner jointly and severally liable for the obligations of the partnership. Where the purpose is nonprofit, or where a court proceeds on a looser theory, the group may be treated as an unincorporated association with capacity to be sued in its common name. In either case the absence of a formal entity places the group, and some or all of its participants, under the oldest and least protective forms of association the law knows.
The decided cases. Four federal decisions frame the American law. In Sarcuni v. bZx DAO (S.D. Cal. 2023) the court held that users who lost funds in a hack had plausibly alleged a general partnership among all the holders of the DAO's governance token, and that investors alleged to have held and voted tokens could be sued as partners. In Commodity Futures Trading Commission v. Ooki DAO (N.D. Cal. 2022 and 2023) the court held that the successor DAO could be sued as an unincorporated association under California law and served through its website's help chat box and online forum, and later entered a default judgment against it. In Samuels v. Lido DAO (N.D. Cal. 2024) the court held that a purchaser of governance tokens had plausibly alleged a general partnership, and that three of four venture investors who had participated in governance could be held liable as partners for the DAO's alleged sale of unregistered securities. And in Houghton v. Leshner (N.D. Cal.), litigation over the Compound DAO, the court has twice refused to dismiss claims against investors and others alleged to be partners, most recently in August 2026, holding that liability turns on meaningful participation in governance. The Securities and Exchange Commission's 2017 report on The DAO, which treated that organization as an unincorporated issuer of securities, precedes all four.
The doctrinal pattern. Read together, the decisions establish four propositions at the pleading stage. First, a DAO that operates a business for profit can be a general partnership whether or not its participants intended one, because the partnership statutes say so. Second, a DAO that cannot be fitted to the partnership statute may still be sued as an unincorporated association. Third, the persons exposed as partners are at least those who hold tokens and use them to take part in governance, and the more recent decisions limit exposure to those who participate meaningfully, leaving passive holders aside. Fourth, the procedural obstacles that DAOs present, including the absence of an address, officers or an agent for service, are overcome by alternative service through the channels the DAO itself uses to communicate. None of the decisions is a judgment on the merits after trial, and each was decided on allegations taken as true. The planning consequences are nonetheless clear.
Organization of the chapter. Section ¶ 1910 describes what a DAO is in fact, in the terms the courts have used. Section ¶ 1920 sets out the three legal characterizations available under American law: general partnership, unincorporated nonprofit association and joint venture. Sections ¶¶ 1930 to 1950 discuss the cases in full. Section ¶ 1960 asks who is a partner and what each class of participant risks. Section ¶ 1970 covers defences and procedure, including capacity, service, personal jurisdiction, terms of use, the securities laws and governance attacks. Section ¶ 1980 treats federal tax classification and reporting. Section ¶ 1990 addresses the measures available short of a wrapper, explains why most organizers now adopt one, and closes with a checklist.
Terminology. This chapter uses "DAO" for the organization as a matter of fact, without implying any legal characterization. "Governance token" means a token whose holders may propose or vote on decisions binding on the protocol or the treasury. "Unwrapped DAO" means a DAO for which no statutory entity has been formed to hold its assets or conduct its affairs. "Participant" is a neutral term for anyone who holds tokens, votes, delegates, develops code or provides services to the DAO; whether a participant is a partner or member is the question the chapter examines. The terms used for the technology follow ch. 2 and the glossary in App. A.