The legal status of the DAO

[OldPaul]

I completely agree, becoming a trustful organization being somehow also recognizable as a legal entity will help strenghten DAO furthermore in the financial world, and will not reduce decentralization as its own value added feature. The point, to my opinion, is not if we should do this but how: this is the unprecedent task we face today

[donnelly]

@Hayden
I'm sorry I can't agree with your analysis here at all

we can negotiate terms down to a more subtle level in the real, physical world in plain language and expect this to be upheld in a court of law.

The problem in the physical world is this type of 'subtle negotiation' which often involves cosy deals / backhanders / someone with a vested interest interceding in a way that is not apparent to other participants.

Reverting to law is the legacy approach and previously was the only method of resolving issues because there was a lack of clarity or immutability in the original 'contract'.

The DAO changes all that ..or at the very least is a step towards changing all that.

Ultimately we cannot exist solely on the blockchain.

I see no reason why The DAO cannot exist solely in the ether, by creating a legal 'real world' entity firstly we will be faced with myriad problems on which it will be very difficult to obtain consensus;-

• what form of entity
• what jurisdiction
• where to pay taxes and for what or for what aspect of the operations
• how to offset the contribution in kind by thousands of individuals
• how to handle R&D offsets on a global scale
• how to handle accountancy / legal / administration

In the autonomous format each individual is solely responsible for their own compliance.

Secondly we ourselves would be creating an attack vector for those violently opposed to the entire concept.

Property: The DAO can easily engage in contracts with legal entities to hold physical items on our behalf.

Taxes: this is a difficult question that warrants a lot more discussion. Unfortunately what has grown up are national tax codes that are largely incomprehensible to the general population and comprising 00000's of pages that are often contradictory,

This has given rise to tax loopholes, offshoring and the playing of the tax minimisation game. It could be said that the global tax system is completely broken from a human perspective.

It does not reflect / respect any life cycle decisions by individuals:-

• young parents with children
• people wholly opposed to war
• those seeking affordable education
• the sick or the elderly wishing for better health care
• nearly everyone everywhere wising for better roads / communications / public transport
• a cohesive approach to waste / pollution

Each segment deserves to be able to direct their taxes to an area of choice. One could begin by examining many of the problems we face in the real world today and how they are directly related to the misuse of taxes - but this is a whole other debate for another day.

[rkbbg]

I disagree that The DAO should try to become a legal entity. For 1) there is the jurisdiction issue, the physical location issue, the hiring of employees and legal counsel, board of directors, corporate officers, etc. The DOA shouldn't have any of these things.

2) The DAO is not an operating company. It doesn't do anything in the physical world. The contractors do and should probably be legal entities, but the DAO is a group of private citizens investing their own money. It is more of an investment club rather than a corporation.

3) As far as taxes go... pay taxes to whom? Every country/city/locality on Earth? I think it is up to every individual token holder to pay the appropriate taxes in his/her jurisdiction based on the dividends (s)he receives and any capital gains associated with trading The DAO tokens. Of course the contractors, being physical entities in the real world with physical operations should pay taxes in their locations like any other company would.

[Bitcoing]

You see it is a lending club.. Would a judge see it as such? My problem isn't how those in the dao see it...it's clear everyone thinks they are dancing free in a zero jurisdiction fantasy land. My problem is with how legal jurisdictions will see it, becuase they have the power to take your house, lock you up and steal your car.

[thecryptofiend]

Exactly.

It's all very well saying the DAO shouldn't be a legal entity but that means zero to those of us who might face particular sanctions due to a judge's or governments own interpretation of the law.

We don't live on the blockchain. We live in the real world and if we get hauled up in front of court because of something relating to the DAO we can't say that "the DAO is not a legal entity" or "it's not in the smart contract" as a defence.

Lofty goals and ideas are nice but it would be good if some people took their heads out of the clouds and looked at what happens in real life.

[sco]

of the problems we face in the real world today and how they are directly related to the misuse of t

Exactly, why should we be trying to integrate with a legacy system (government & current law), when DAOs are a direct response to this ineffective system anyway...

The real question is; if you can't identify most members, how could anyone exact violence against us? & If governments do try to exact violence against us, then how?

• Are they going to shut down all Ethereum nodes?
• Are they going to track down token holders and incarcerate them, if so, how (ip is not very reliable means & it's costly to track many people)?
• Will they use scare tactics on external vendors / contractors to reduce our ability to execute?

While these are risks, they are not insurmountable. My point is; even if the "legacy" legal & government system tries to use force against us for whatever reason (taxes, etc.), why would we care? You can't really stop a decentralized system... well it would take monumental effort & we'd just apply a wider decentralized strategy to risk mitigate (tunneling traffic via SSL so it looks like web traffic, packet shaping, building a real mesh-network, etc.).

Everyone keeps going on about how we should back-port a DAO into the existing "system" of government, governance, & law... Who cares, the whole point of DAOs, cryptos, & decentralization, is build a better system. Lets focus on forward thinking solutions, not backward & backport-integrations...

[TeknoTeddy]

Even if someone decided to track down token holders (which I think would be pointless) how do they prove that the person they tracked down actually owns tokens or is a part of The DAO?

I could say I own a million tokens and actually own zero.

Also if we do not belong to any nation because we are only on the blockchain then how do we become a part of a nation if we are not located their?

The costs would be so much higher if we were an entity and I believe that once/if we figure out how to be one we need to also debate the cons and pros because as it currently stands our overhead is very small, but if we were a legal entity our overhead would probably be huge.

[rkbbg]

I agree the time and expense of any government trying to track down all token holders would not be worth the trouble, if it was even possible. And morally the contractors, who will be companies, are already going to pay taxes on their profits, the only thing the DAO will be avoiding is paying double/triple/+ taxation on money that has already been taxed. And any token holder who lives in a jurisdiction which taxes dividends or capital gains would be free to declare those to the proper authorities, pay their taxes, and maintain compliance with the laws personally.

[thecryptofiend]

It is short-sighted to assume that it is impossible to track down people using the DAO.

People have been found and tracked down using the Bitcoin blockchain in combination with other tracking methods. The reason it hasn't been done on a large scale is the work and expense involved. All of that is getting cheaper as time passes.

As I said before it doesn't seem like a problem, until IT HAPPENS.

Nobody thought that governments could possibly be spying on all our digital communications - it was just too much information, too much work etc and then Snowden happened.

My point is it is better to deal with these issues now rather than waiting for them to arise.

Perhaps in the future a DAO can be completely separated from any kind of legal framework but I would like a legal expert to look into it to be sure, rather than just relying on people's uniformed and unsubstantiated opinions.

[North]

Then perhaps anyone with your concern should seek legal counsel within your own jurisdiction and gain insight on how they would treat your situation with the proposals you are deciding to vote on.

The problem with your “legal experts” is they will most likely not apply to the majority of the DAO as they don’t live in your jurisdiction. And remember, you may have legal experts within this community too.

[thecryptofiend]

Again we are dealing with conjecture when it comes to your argument. I would rather have some real legal advice on this matter. It is patently ridiculous for DAO holders to go and individually get advice on this matter and even if they do how does that move the DAO itself forward?

Even smaller international organisations have to deal with these sorts of issues so it is not insurmountable - and I'm 100% sure that each individual involved in them does not go and get independent legal advice which is the equivalent of what you are suggesting.

[North]

But that is the only way to satisfy your argument. Once again, every jurisdiction has different laws and no one can tell you with absolute certainty if what you are doing is illegal except your own jurisdiction. If you, as an individual, are worried about your government body viewing your actions within the DAO as illegal, then consult them about this. But the DAO, as an entity, should not consult legal advice for your jurisdiction because the DAO is located everywhere and nowhere.

With your example with the individuals in this international organization, who would they deal with in regards to legal matters? My guess would be it goes back to the jurisdiction where they plan on declaring taxes.

[thecryptofiend]

I think I see what you are saying. I believe I have equated the issues relating to personal activity with the actions of the DAO itself and in relation to this you are probably correct. I think it is a misunderstanding on my part. - It would be like buying shares in a company - so you would be responsible for your duties in relation to this. I think this is what you are getting at?

I still believe that the DAO itself needs to be a legal entity though - more to protect itself from things like non-payment and also to further advance the ways of making money such as holding equity. I believe a professional opinion in these sort of matters would be useful.

[North]

Yes, and I am glad we see eye to eye now.

With the DAO needing to be a legal entity, that is a whole other animal that would need to be addressed if the DAO decides to go that route. Personally I believe we can govern ourselves with future contractors, but that is yet to be known.

I am still up in the air with owning physical equity. Remember, where ever that physical equity is located, that jurisdiction could seize if they deemed appropriate. It still needs to be decided if that's a risk the DAO would want to take.

[TeknoTeddy]

With the DAO needing to be a legal entity, that is a whole other animal that would need to be addressed if the DAO decides to go that route. Personally I believe we can govern ourselves with future contractors, but that is yet to be known.

I am still up in the air with owning physical equity.

I think I share the same opinion about this part.

[rkbbg]

Holding physical equity will cause problems. Equity would need to be held in a legal entity's name. What/who holds the equity? The DAO can hold ETH and be party to contracts on the Ethereum blockchain, but anything else brings up all kinds of issues.

[rkbbg]

One exception to what I just said though, is The DAO could hold tokens of other DAO type organisations.

[TeknoTeddy]

yeah that is a big part of these topics is if The DAO ever WANTS to own equity how would they do it and would it be worth The DAO to do such a thing in the long run. What would be the side effects and pros/cons.

Maybe The DAO cannot own equity yet with how current laws are, but perhaps a nation will come up with a law that allows The DAO to register itself as a DAO in that nation and there for be able to own equity.

We don't know the answers to these and many other things yet.

[thecryptofiend]

Yes I agree it is a double edged sword for sure.

That's why a professional opinion on not just the options but the pros and cons themselves would be very useful.

It is important to find out because investing in some kinds of companies may not be possible through the slock.it type model and in these cases equity or intellectual property may be the only thing on offer.

If we close the door on these types of deals then we stand to significantly limit what we can invest in but obviously we open ourselves up to the potential legal issues involved. So it is a conundrum.

[TeknoTeddy]

Anyone is welcome to make a proposal. I think another issue is to find a lawyer that would even be able to figure out this cluster fuck. Maybe their isn't a lawyer that can even help us yet. If their is not then maybe in the future their will be.

It would be pointless to go to most law firms and ask for help as this is a very unique situation. If someone makes a lawyer or law firm looks into it and then make a proposal that most people like and vote yes to that would be nice (not saying it will happen).

At the same time it may not be worth paying a million dollars just to get an idea of where we stand legally. Then again maybe it will I don't think anyone knows haha.