How Do You Sue A DAO?
from the who-do-you-sue? dept
Decentralized Autonomous Organizations (DAOs) are one of the most fascinating things to emerge from the crypto space. While everyone was going crazy over NFTs, almost all of the more interesting things were happening in the DAO space. DAOs are something of an experiment in being able to form new kinds of organizations quickly in non-traditional ways. It’s not a corporation. It’s a much more amorphous digital setup to bring together a group of people to work towards a common goal, often (but not always) involving some tokenization and voting power.
Of course, as with any such thing, some very silly things may happen by people confused about how things work. But, there are many (less high profile) DAOs that are showing how these vehicles can be useful in bringing a group of interested people together to accomplish something.
But, then, of course, there are the legal questions. A few weeks ago the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Ooki DAO. In theory, the Ooki DAO was decided to allow members to make leveraged trades on digital assets. The lawsuit alleges that the Ooki DAO violated commodity trading laws, as well as failing to abide by know your customer (KYC) laws for financial products. But… that’s left open a big question: just how exactly does one sue an amorphous blob of people who have come together for this purpose?
And, for starters, how does one serve a lawsuit on a DAO?
The CFTC asked the court to accept a somewhat unique form of service: posting the lawsuit to a “help chat bot” on the Ooki DAO website, and then posting a copy to Ooki DAO’s public forums.
By choosing to organize itself as a DAO, the Ooki DAO has structured its business in a way that has erected significant obstacles to traditional service of process. The Ooki DAO has no headquarters or physical office location; no mailing address; does not appear to be registered in any jurisdiction; and does not have a listed president, secretary, treasurer, or agent appointed to accept service….
Instead, it is a completely decentralized unincorporated association of anonymous individual Ooki Token holders who have voted those tokens to participate in the business of operating the Ooki Protocol. The Ooki DAO offers a website to access the Ooki Protocol (ooki.com). Through that website, users may submit comments or requests for assistance through a Help Chat Box linked through the website. Separately, the website links to an Online Forum for Ooki Token holders to discuss and vote on Ooki DAO governance issues (forum.ooki.com)….
In addition, on the same date it filed the Complaint, the Commission provided copies of the summons, complaint, and additional related papers to the Ooki DAO via the Ooki DAO’s Help Chat Box (through a submission with attachments via the Help Chat Box); and further provided notice of the action via the Ooki DAO’s Online Forum (which does not permit the posting of attachments). In addition, the day after serving the summons, complaint, and certain additional related papers, the Commission served additional related papers on the Ooki DAO via the Help Chat Box, with contemporaneous notice of such service via the Online Forum. In these communications, the Commission requested that the Ooki DAO contact counsel for the Commission to discuss the litigation, including service of process.
As of the filing of this motion, the Ooki DAO has not responded to the request to contact counsel for the Commission
While the Ooki DAO did not respond to the CFTC’s request to contact the Commission… it did start discussing all this on its forums, as laid out in a further filing by the CFTC.
Shortly after filing the Motion for Alternative Service, the Commission discovered that, approximately contemporaneous with or shortly after the Commission filed the Motion for Alternative Service, a post appeared in the Ooki DAO’s Online Forum (forum.ooki.com) titled “Future of Ooki DAO” and discussing the Commission’s litigation against the Ooki DAO…. This demonstrates clear awareness by the Ooki DAO and its members of the Commission’s action. Thus, in the Commission’s view, this is relevant to the Court’s consideration of whether to grant the Motion for Alternative Service because it demonstrates the Ooki DAO’s actual notice of the action. The Commission thus requests that the Court consider this additional fact when deciding the Motion for Alternative Service.
And thus, the court okays service by… help bot.
The Motions are GRANTED and the Court orders that service of process on the Ooki DAO may be made in this action by providing a copy of the summons and complaint through the Ooki DAO’s Help Chat Box, with contemporaneous notice by posting in the Ooki DAO’s Online Forum
As the Politico article linked above notes, there are a variety of other legal questions around this case, but get ready for a lot of similar questions cropping up. One thing I will note is that, while it’s great to see experimentation, people really need to recognize that just because you’re experimenting with new forms of organizations, it doesn’t mean you get to just ignore the law. That’s not how any of this works.