Decentralized Autonomous Organizations (DAO) have been gaining popularity recently, but they continue to face significant legal challenges in the United States. These organizations cannot pay taxes, protect their members, comply with regulations, or defend themselves in court. However, a new bill proposed in California could change all of that.

A Clear Pathway For DeFi Organizations

This new bill aims to modify the state’s existing unincorporated association (UA) entity form to provide a clear pathway for DAOs to use this form. According to Miles Jennings, a prominent blockchain expert, this new entity form will enable DAOs to overcome nearly all of the most pressing legal challenges they currently face.

The new entity form would be specifically designed for DAOs and provide a pathway for these organizations to comply with state regulations and pay taxes. It would also offer member protection and allow DAOs to defend themselves in court, addressing some of the key legal challenges holding back these organizations’ growth.

Jennings notes that the proposed bill is a significant step forward for the DAO industry, providing much-needed legal clarity and protection for these organizations. He also believes that the new entity form could serve as a model for other states, paving the way for the widespread adoption of DAOs nationwide.

Furthermore, per the analysis of Miles Jennings, this potential solution comes at a critical time as attacks on DAOs are growing and threaten the viability of web3. Therefore, California must act quickly to approve this bill and protect web3 innovation.

Additionally, Jennings suggests that the current legal framework for DAOs is inadequate and has hindered the growth of these organizations. The existing Limited Liability Company (LLC) entity form is unsuited for most protocol DAOs, leaving them vulnerable to legal challenges and regulatory compliance issues.

Small businesses and startups often use LLCs as they are relatively easy to set up, maintain, and offer tax flexibility. However, the LLC entity form is not specifically tailored to the needs of DAOs, which require unique legal frameworks to operate within.

However, the

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Author: Ronaldo Marquez

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