January 2024 Recap
Making sure our new year's resolutions last until at least February.
January is everyone’s favorite month. It marks the start of something new, an opportunity to welcome a fresh, new year with optimism and vigor after spending the last two months in Bacchanal celebrations for the holidays (I swear I didn’t eat an entire pie…just most of it). Having awoken from our food-induced hibernation, the members of LexDAO are eager to get back into the swing of things too with newly-forged diet and exercise plans and a renewed enthusiasm for delivering the latest and greatest web3 content to you. Abundant buffets with family and friends may be behind us, but we won’t let that stop us from serving up some tasty web3 treats to you. Join us below to see what happened this month.
Attention lawyers: we'll pay you 75 USDC for a 30-minute meeting to tell you more about MIDAO! Book your meeting here today! - the MIDAO team
What’s New at LexDAO
We are one month into 2024 already and we can still barely believe it. Why? Because of just how much has been going on with LexDAO! Your favorite guild of legal engineers has been hard at work continuing our mission of bringing the latest and greatest web3 tools and legal education to the community. This month we have a number of updates from our members, some of whom you may already know and some who are making their big newsletter debut. Stick around to see what we’ve been cooking up!
Member Spotlight: Mason Bump
Mason Bump (@jmasonbump on Discord) has been a key contributor in blockchain law discourse since 2018 and a Member of LexDAO since 2019. He recently co-founded a blockchain startup called Blockserve that has been successful in serving scammers with legal service of process via NFTs, allowing victims to seek recovery through the American court system. He recently gave a talk at Nebular Summit in Paris titled “Mason Bump of Figment on Modern Building Materials for Contracts: Staking” discussing blockchain tech as modern building materials for contracts, which is a great primer and explanation for the legal modernist movement we are trying to build at LexDAO. He also serves as an expert witness for crypto- and web3-related cases through his agency Blockchain Expert Consulting Inc.
We are thrilled to highlight Mason’s recent accomplishments and are sure that he will be bringing more exciting contributions to the web3 community this year.
Funds at Risk: Tackling Unlimited Liability When Investing in DAOs
written by @haroldo_msn
The Problem
Many notable DAOs currently operate as “unwrapped DAOs”, lacking a formal legal entity with limited liability - a “legal wrapper”. This poses a significant risk for funds that hold governance tokens for these DAOs in their multisig wallets, potentially exposing all of those funds’ assets to unlimited liability for the obligations of these DAOs. Fortunately, there are straightforward solutions.
While DAOs are still novel, and their treatment as legal entities is evolving, some trends regarding their treatment are starting to emerge. Any Unwrapped DAO could be classified as an unincorporated association and potentially treated as a general partnership. In such instances, individuals or entities holding governance tokens might be deemed general partners, exposing them to joint and several liability for all of the DAO’s obligations.
Recent cases, such as Commodity Futures Trading Comm’n v. Ooki Dao (N.D. Cal. 2022), Loon v. Dep't of Treasury (W.D. Tex. 2023), and Sarcuni v. bZx Dao (S.D. Cal. 2023), illustrate how courts have reasoned that, in certain situations, unwrapped DAOs and their governance tokens holders may be considered unincorporated associations. The bZx case went a step further by finding a general partnership among every governance token holder. Although no case has expressly found each token holder jointly and severally liable yet, recent case law indicates the potential route to such a determination.
In a recent administrative proceeding against Barnbridge DAO, the Securities and Exchange Commission (SEC) referred to the DAO as an unincorporated organization. Although the SEC’s action isn't jurisprudence, it fits the pattern that is playing out in courts. This suggests that holding unwrapped DAO’s governance tokens presents an unlimited liability issue that deserves attention.
Analysts claiming that merely holding an unwrapped DAO’s governance tokens does not generate the potential of unlimited liability, as long as governance rights are not exercised, are misguided. The court in Ooki DAO expressly stated that having governance rights is enough to govern the DAO, even if those rights are not executed. That court went as far as to say: “it is irrelevant that some Token Holders voted against certain decisions or that they abstained from voting … not voting and voting against a proposal are both voluntary choices made to further the common purpose of governing the DAO” .Commodity Futures Trading Comm'n v. Ooki Dao, 3:22-cv-05416-WHO 11 (N.D. Cal. Dec 20, 2022). Similarly, the court in bZx stated that even if governance token holder’s governance rights are limited to certain aspects of the DAO, there still exists governance rights over the DAO. In sum, any fund that holds governance tokens for unwrapped DAOs in their own multisig wallets is potentially exposing all of the fund’s assets to joint and several liability, even if they don't exercise voting rights.
The Solution
The unlimited liability issue presents a dual challenge: 1) funds have substantial resources (i.e., deep pockets), making them attractive defendants, and 2) even deciding on whether to set up a legal wrapper is meticulous for many DAOs. Given these complexities, how can funds safeguard themselves?
A viable solution involves isolating those tokens from the rest of the fund’s assets, which can be achieved through various methods. A particularly proactive approach is to flip the problem by having the fund establish its own legal wrapper specifically for those tokens. This “on-chain judo” move not only eliminates the unlimited liability issue but also simultaneously frees the fund from depending on third-party actions.
To illustrate this concept, let's consider the fictitious XYZ Fund, which holds governance tokens from multiple unwrapped DAOs. Upon realizing the unlimited liability issue associated with these specific governance tokens, the fund's counsel proposed creating a dedicated DAO with the sole purpose of holding these governance tokens in its multisig wallet. That dedicated DAO, in turn, would establish its own legal wrapper.
In this set up, if any unwrapped DAO faces legal issues and a court imposes joint and several liability on all governance token holders, XYZ Fund’s liability would be limited to the assets held by the dedicated DAO. This represents a significant improvement compared to the previous scenario where XYZ Fund’s liability would encompass all of its assets.
It is imperative that this problem be addressed. There are many potential solutions, including the hypothetical one described. But it is important to recognize that not all solutions are ideal for all funds. This article offers general analysis and should not be construed as legal advice. You should consult with your attorney to analyze how these matters may affect you.
Web3 Event Horizon: BorrowLucid Around the World
Written by Christina @borrowlucid
We’re going to Bangkok and beyond!
There are already so many events planned for 2024 that I’m trying to be more discerning about which ones I actually attend. This spring, I’m most looking forward to Eth Taipei, which will host a conference from March 21-24, 2024 and Eth Seoul, from March 29-31, 2024! After that, I’m hoping Stanford will host another Science of Blockchain. DAPPCON is May 21-23, 2024 which I’ll probably skip, although it’s still recommended for builders.
I’m not going to EthDenver, February 23 - March 3, 2024. But if you are, bestape and Yalor are collaborating on a side event titled Law at the Limits. We encourage any LexDAO members and interested people to stop by and say hello! There may even be some goodies in store for those in attendance that can catch them.
EthGlobal is a good place to go for current information on Ethereum hackathons, virtual and IRL. Small events, like Web3FC, April 17-19, 2024, or last year's General Forum on Ethereum Localism, are my favorites, but require some dedicated attention to catch before they’re over. I’m subscribed to many newsletters and channels, and will often share what I’m looking forward to in the Warpcast Chones channel.
I already applied to attend Farcon in Venice Beach, California, May 2-5, 2024. This is for the Farcaster community, which includes apps like Warpcast, and will have one day of sessions and three days of hacking with side events. EthCC, is taking place on July 8-11, 2024 in Brussels and Chinwags, a playground for on-chain culture and creativity, will be near that. If you can get yourself from Berlin to California in a couple days, FWB Fest is August 1-4, 2024.
All of this is leading up to DevCon, happening on November 12-15, 2024, in Bangkok! Brands have already begun reserving hacker houses for the entire month. Expect popup cities, retreats, hackathons, workshops, summits, raves, and parties from brands, communities, organizations, ecosystems, and movements. We can’t even try to make it to everything!
This list is not exhaustive. There are many events that I’m missing. If you make it to an event that I’m going to, I hope we have time for an in person chat.
LexDAO Study Group Gets a Reboot with Paolo Maria Gangi
LexDAO has re-started its study group session under the management of Paolo Maria Gangi (@pmgangi both on Discord and on Telegram). The first one will be held around mid-February on X (formerly Twitter) and will focus on international tax law for DAOs featuring Anish Kamboj from Canada (Discord @cryptotaxlawyr), Jason Schwartz (Discord @cryptotaxguy) from USA, and possibly a European tax lawyer. The exact date and time of the mid-February study group session will be communicated with adequate advance notice in the LexDAO Discord server as well as on X.
Paolo also recently published a book in his native language (Italian) titled “Diritto die non-fungible token (NFT)” discussing the law of NFTs, so his insights are not to be missed! Please reach out to Paolo if you have any proposals for future study group sessions or if you have any questions about how you can get involved.
Upcoming Events
LexDAO at ETH Denver 2024: Announcing the 2024 LexDAO Membership Drive
It’s no secret, 2023 was a difficult year for DeFi and crypto overall. But DAOs have shown surprising resiliency and staying power through the bear market, and it seems that spring is finally emerging. As the new year begins, we’re proud to count ourselves among those builders who stayed strong throughout the ordeal, achieved our goals, and have new and exciting things in store for 2024!
We're thrilled to share that we’ve recently been awarded over 75,000 $OP in Optimism's 2023 RetroPGF funding round for our work in 2023, and we can’t wait to continue our momentum into 2024 and beyond. These funds will be deployed by LexDAO to continue building a future where Law is a Public Good, and it all starts this week with the announcement of our 2024 LexDAO Membership Drive.
We’re going to be live on the scene at Eth Denver and on the airwaves with in-person meet-ups, afterparties, live streams, study groups, gaming tournaments, and podcast features all slated throughout the coming weeks. This membership drive will serve to rally the troops for 2024, which is set to be our most successful and exciting year yet.
Interested in joining the fight for law as a public good? Read more below!
What's in Store:
Whether you’ll be in Denver for the drive or not, we have plenty of ways to get involved, advocate, or just have fun reconnecting with your ol’ pals at LexDAO. Here’s a tentative roadmap, which will be constantly updated with more details as we approach the launch of EthDenver 2024:
Events:
Law at the Limits - Denver 2024 (3/1/2024 from 1:00pm-7:00pm)
Join MetaCartel & LexDAO for a dynamic day of legal insights and collaborative workshops. From 1:00-5:00pm, engage in talks covering key topics such as the future of DAO governance, DAOs as human/AI coordination (BORGs), Infosec and exploit law, and Network states vs Nation States. Featuring industry experts including Gabe Shapiro (Delphi Digital/LexPunk), Jordan Teague (Campbell Teague), our very own Nick Viavant (LexDAO), Yev Muchnik (Launch Legal), Stephen Palley (Brown Rudnick), and more, this event promises a deep dive into relevant areas for the DAO ecosystem which is bound to be fascinating for veterans of the industry, as well as newcomers. Following the talks, join us for a Crypto Happy Hour with snacks from 5:00-7:00pm at the Gitcoin House. Don't miss this opportunity to explore the forefront of DAO discussions and network with professionals in the field.
Meet-ups
We will have more meet-ups scheduled—whether educational or just for drinks, you won’t want to miss out!
LexDAO Membership Livestream
On the day of our big in-person event, we will be live on X for a 12-hour livestream talking about all things crypto law all day for anyone who can’t make it in person!
We have crypto lawyers from all over the world who will answer your general legal questions from business to criminal matters in the crypto world!
LexDAO Members Gaming Tournament
Stay tuned for more information and get your game face on! This will most likely take place both during and after our 12-hour stream.
LexDAO Study Groups
We will be hosting educational study groups throughout the duration of our membership drive! Topics for these talks are being finalized, but past topics have included cutting edge legal and technical crypto discussions around concepts like fungibility, securities laws, tokenization of real world assets, as well as many others.
Incentives and goodies:
We will have lots of swag available (some free, some for purchase, and some exclusively available as rewards for participation in the drive!)
Membership Discounts
Win free advertising slots in our newsletters!
Raffles and Contests!
Grand prizes to be revealed next week!
Join the Movement:
Are you a seasoned LexDAO member eager to renew your commitment? Perhaps a legal professional looking to dive into the world of blockchain law or learn more about it to advise your current clientele? Or maybe you're just someone excited about the future of legal engineering? Whatever your background and predilection for education, accessible legal advice, and fun worldwide, we would love to have you join us!
Get Involved:
Will you be attending ETH Denver? Let us know if you'd like to get involved!
Are you passionate about podcasting, gaming, or creating engaging content? We want to hear from you!
Curious about the incentives we have in store for renewing and new members? Stay tuned for updates in our Discord or on X!
Stay Tuned for Exciting Updates:
As we approach the Membership Drive, stay connected through our newsletters, social media channels, and website for exclusive insights, behind-the-scenes stories, and the unveiling of our roadmap for the year.
2023 was a year of bears and bullies, with the SEC, CFTC, and seemingly every other letter in the alphabet coming after the blockchain industry with all of their might…but we’ve weathered the storm and despite all of the “bad law” we’ve collectively endured, we still believe that “good law” exists, and has prevailed.
And so, as another year begins, LexDAO stands once again at the ready; ready to continue advocating and building for a future where everyone has access to affordable legal services; ready to continue manifesting the industry of Legal Engineering; ready to chart a course towards a future where "Law is a public good."
Like what you see?
LexDAO relies on donations from the community to maintain our operations and continue delivering content and resources to the web3 community. If you enjoy our work, please consider donating! Visit https://lexdaogrant.us to see how you can contribute. We thank you for your continued support!
Get Involved!
LexDAO is always looking for new members! If you are interested in the work we are doing:
Check out our Discord and ask some questions (feel free to DM our Assistant Operator Cimply (Cimply#3820) with any onboarding questions).
Join our bi-monthly governance calls on Wednesdays at 12pm EST in Discord!
When you are ready, check out the LexDAO website for more information on how you can become a part of our growing community of builders, thinkers, and legal explorers!
