tl;dr
A federal court ruled that Lido DAO, a liquid staking protocol, can be treated as a general partnership under state law, rejecting Lido's claim that it isn't a legal entity. The ruling sets a precedent for how profit-driven DAOs are treated, stating that identifiable participants managing the DAO's ...
A federal court has ruled that Lido DAO, a liquid staking protocol, can be treated as a general partnership under state law, rejecting Lido's claim that it isn't a legal entity. The ruling sets a precedent for how profit-driven DAOs are treated, stating that identifiable participants managing the DAO's operations cannot evade liability.
Implicated parties included Paradigm Operations, Andreessen Horowitz, and Dragonfly Digital Management as general partners, while Robot Ventures was dismissed due to insufficient allegations of active participation.
Plaintiff Andrew Samuels purchased LDO tokens and filed a lawsuit after incurring losses, alleging they were sold to him as unregistered securities. The court agreed with Samuels' contention, finding Lido's structure constitutes a general partnership under California law, and that Lido's lack of direct token sales does not exempt it from liability.
According to court documents, plaintiff Andrew Samuels purchased LDO tokens on the secondary market in April and May 2023 through the Gemini exchange. By December of that year, Samuels filed a class-action lawsuit after incurring losses from purchasing the platform’s native LDO tokens, alleging they were sold to him as unregistered securities, and held Lido DAO liable for the decline in their value.
The court found Lido DAO’s structure—where token holders govern decisions and earn from staking rewards—constitutes a general partnership under California law. It also found Lido DAO’s lack of direct token sales did not exempt it from liability.
General Counsel and Head of Decentralization at a16z crypto, Miles Jennings, said Judge Chhabria’s decision had “dealt a huge blow to decentralized governance” in a statement posted to X on Monday.
These developments carry significant implications for the treatment and liability of profit-driven DAOs, establishing a precedent that will likely impact the future legal landscape for decentralized finance entities.