2. Legal Backdrop: The Wyoming DAO Legislation

As DAOs become increasingly popular as a new form of organizational structure, several U.S. states, such as Wyoming, Tennessee, Vermont, and Colorado, enacted legislation over the last few years to both accommodate and regulate DAOs. In April 2021, Wyoming Governor Mark Gordon signed the first-of-its-kind Senate Bill 38, codified as the Wyoming Decentralized Autonomous Organization Supplement, to recognize DAOs as limited liability companies (LLCs) under Wyoming’s Limited Liability Company Act. The new law recognizes DAOs as separate legal entities capable of forming legally binding contracts and clarifies that the members of a DAO do not owe fiduciary duties to the DAO and each other (save as otherwise provided by the DAO’s articles of association or operating agreement). Each DAO is required to have a registered agent in Wyoming who meets the statutory requirements. Under the new law, a DAO can be either “member-managed” or “algorithmically managed,” provided that the smart contracts can be updated, modified, or upgraded. Articles of organization and smart contracts are to govern: relations amongst and between DAO members, the rights and duties of DAO members, activities of the DAO and the conduct of those activities, and the transferability of membership interests. Since the introduction of the new legislation, 800 entities have registered as DAOs in Wyoming as of March 2023, including CityDAO.