The CFTC has fined Ooki DAO
The CFTC has fined Ooki DAO
Crypto

The CFTC has fined Ooki DAO

By Martina Canzani - 23 Sep 2022

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The CFTC, which stands for Commodity Futures Trading Commission, fined Ooki DAO and its members because it was illegally offering a leveraged and margin trading service to retail, according to the agency. This activity, however, would be reserved only for entities registered with the FCM (Future Commition Merchants), which are required to request KYC from their users as stipulated in the Bank Secrecy Act.

The penalty would amount to $250,000.

CFTC’s fine against Ooki DAO: more details on the incident

It is worth mentioning that unfortunately DAOs can also be sued, evidence of which is the following document.

This time to be under scrutiny is Ooki DAO and the token holders of the Decentralized Autonomous Organization.

Ooki DAO members are reportedly being sued because they are considered part of an association without legal personality.

In this case, the liability of an UA (Unicorporated Association) falls on all individuals who are part of the same association.

This means that if the CFTC can prove that an individual is part of Ooki DAO, the same individual can be charged with violation of federal law.

It also appears from the various documents that the CFTC is trying to figure out what characteristics make a user qualify as a member of the same DAO. Highlighting immediately that participation in DAO votes is certainly a relevant element.

That said, it is expected that users who want to avoid any kind of involvement will opt for the most obvious alternative; that of burning or transferring their tokens.

Regulated DAOs 

Many scholars, legal experts, and cryptocurrency experts believe that the safest way to go if one wants to create a DAO is to be regulated.

The best option would seem to be that of a: “DAO Legal Wrapper,” which allows, in a nutshell, to:

  • Hold the treasury of the DAO;
  • Limit the responsibility of DAO members;
  • Allow DAO members to vote.

An extremely useful solution that allows the DAO to have a structure to manage protocol on behalf of members who, at the same time, would not risk being personally liable and punishable.

So what the DAO could do is vote to structure itself as an Unincorporated Non Profit Association, or Wrapper.

This would allow the creation of a separate legal entity that would handle the governance of the DAO, “modifying, operating and marketing” the Protocol with which the DAO itself is associated.

By doing so in case of disputes with the CFTC, it will be the legal entity that will be legally responsible and not the members of the DAO.

Martina Canzani

Graduated in Law at the University of Milan. After completing her academic studies, she became interested in the world of blockchain, finding it a powerful tool for redemption. Her passion then turned into a job, and now she invests in early-stage projects in decentralised finance and DAO and writes articles on all the news concerning the crypto world.

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