One of the most promising areas in the crypto ecosystem is Decentralized Autonomous Organizations (DAOs). However, a recent lawsuit raises serious questions. DAOs are structures that guarantee the objectives of communities gathered for a purpose through code. The utopia here is exactly this, and the recent lawsuit could potentially damage it.
The Crypto DAO Lawsuit
Previously, the Commodity Futures Trading Commission (CFTC) had filed a lawsuit against Ooki DAO. They won the case, and as announced today, a fine of $643,542 was imposed. Moreover, many restrictions were also imposed on the DAO founders. The recurring words of regulators regarding DAOs resonate in our ears as “don’t hide behind decentralization.” We’ve often seen authorities describe these structures, which are actually centralized, as a disguise. In the CFTC statement, it was written:
US District Judge William H. Orrick has taken a default judgment requiring defendant Ooki DAO, a decentralized autonomous organization accused by the CFTC of operating an illegal trading platform and acting illegally as a futures commission merchant (FCM), to pay a civil monetary penalty of $643,542; ordered permanent trading and registration bans; and ordered any third party providing web hosting or domain registration services to shut down and remove Ooki DAO’s website from the Internet.
This Crypto Lawsuit Could Set a Precedent
Just as the XRP Coin case could set a precedent for how altcoins are classified as securities (assumed by regulators), the Ooki DAO case could also set a precedent. We’ve seen many DAOs, claiming to be decentralized structures, are actually under the control of a few individuals. Bad examples have largely damaged the dream (perhaps the utopia) of DAOs even before it started.
The CFTC statement particularly drew attention to the issue of setting a precedent:
The Court, in a decision setting precedent, ruled that Ooki DAO is a ‘person’ under the Commodity Exchange Act and thus can be held responsible for violations of the law. The Court then decided that Ooki DAO had indeed violated the law as charged.
CFTC Enforcement Director Ian McGinley stated:
The founders created Ooki DAO with a loophole, a clear target like operating an illegal trading platform without legal accountability. This decision should serve as a wake-up call for anyone who believes they can dodge laws by adopting a DAO structure, wants to isolate themselves from legal sanctions, and ultimately puts the public at risk.
