Decentralized Unincorporated Nonprofit Association Act
= legislation in Wyoming, "DUNA"
Context
Miles JenningsDavid Kerr:
"Regulatory actions and class action lawsuits in the United States have alleged that without a legal entity, a DAO is just a general partnership. While there are several viable arguments that challenge these allegations, that categorization would be catastrophic for DAO members, subjecting them to untenable tax risk and legal liability. Momentum is currently on the side of the regulators and plaintiffs firms. If their theory propagates and succeeds, it will likely be a death knell for decentralized governance.
The DUNA stops this vector of attack dead in its tracks, solving the key challenges DAOs face and substantially mitigating the risks facing DAO members. It provides DAOs with legal existence, enabling them to contract with third parties, open bank accounts and provide an easy vehicle for the service of process. It enables DAOs to pay taxes and meet their informational reporting requirements. It protects DAO member privacy from the federal government. And it provides DAO members with liability protections.
It accomplishes all of this without interfering with how DAOs are currently launched and operated – it safeguards decentralization and positions DAOs to effectively grow the ecosystems of their underlying blockchain networks."
(https://a16zcrypto.com/posts/article/duna-for-daos/)
Description
Miles JenningsDavid Kerr:
"On March 7, 2024, SF50, the Wyoming Decentralized Unincorporated Nonprofit Association Act, was signed into law with an effective date of July 1, 2024. The bill was closely modeled on Wyoming’s existing Unincorporated Nonprofit Association Act, but it is purpose built for decentralized organizations.
Just as Wyoming’s previous DAO law (W.S. 17-31 Decentralized Autonomous Organization Supplement) can be thought of as a “Digital LLC”, SF 50 can be thought of as a “Digital UNA.”
Additionally, people can think of it as the Web3 equivalent to a town council. The council’s purpose is to protect the township’s standards and operations by enforcing the codes and covenants of the community, which ultimately serves the interests of its citizens, their homes and their businesses.
Similarly, the purpose of a DUNA is to protect and support the underlying blockchain network, but like a town council, it is not itself a business.
* WHY IS IT NECESSARY?
Entrepreneurs around the world are using blockchain technology to build a better internet – one that returns the Internet to its foundation as an open network. But, if we leave it to corporations to own these networks, we’ll end up in the same place we are now, where our entire digital world is intermediated and controlled by a handful of monolithic companies.
Blockchain technology offers a compelling solution to this problem. It enables the creation of open blockchain networks that function more like public infrastructure than proprietary technology – anyone can build on them, just like anyone can currently build a business using open internet networks like email and websites.
DAOs are made up of members of a community that governs the affairs of an open blockchain network. They are a critical tool for ensuring that the network remains open, that it does not discriminate and that it does not unfairly extract value. The DUNA helps DAOs accomplish this by solving three of the key challenges they face – it gives them legal existence, enabling them to contract with third parties and appear in court, it enables them to pay taxes and it provides them with limited liability from the actions of other members. All of these are commensurate with other legal entity forms and are table stakes for building in America.
The DUNA solves these challenges without exposing consumers to additional risks. A DUNA can be used for the decentralized governance of open blockchain networks, but anyone building a consumer-facing application like a social media app, car service, or music streaming app on top of these open networks would continue to use traditional entity forms, like the corporation or LLC. And even though this paradigm includes the use of corporations, the fundamental difference is that corporations no longer control the underlying networks, they only control user-facing apps. That difference greatly reduces their ability to extract value like web2 companies do."