The Commodity Futures Trading Commission (CFTC) filed a lawsuit against the Ooki DAO platform to engage in activities that can only be performed by regulated entities called Futures Commission Merchants (FCMs).

The regulator said the DAO illegally offered leveraged and margined retail commodity transactions in digital assets and failed to adopt customer identification requirements known as KYC.

The watchdog reasoned that the founders (Bean and Kistner) are responsible for the DAO’s alleged illegal behavior because they held Ooki tokens and voted on government proposals on how the DAO operated.

“The order finds that the DAO was an unincorporated association of which Bean and Kistner were actively participating members and were responsible for the Ooki DAO’s violations of the [Commodity Exchange Act] and CFTC regulations,” the Commission stated,

As a result, the CFTC is seeking sanctions against the DAO, including take-back, fines, and possible trade and registration bans.

However, CFTC Commissioner Summer Mersinger disagreed with the regulator’s ruling, calling the action “blatant regulation by enforcement” and saying that (the ruling) did not “rely on legal authority.” of the Commission’s mandate. “I cannot agree with the Commission’s approach of determining the liability of DAO token holders based on their participation in the governance vote for several reasons,” Mersinger wrote.

The way the CFTC defined the Ooki DAO as an unincorporated association and determined the liability of the founders could have a far-reaching impact in the world of DeFi and DAO.

Enforcement action is already having a worrying impact on certain DAOs. On Saturday, Delphi Labs General Counsel Gabriel Shapiro tweeted: “I can already see DAO stewards talking about stepping down.”

The DAO controversy

DAOs have become so big in the crypto landscape that there is a belief that all consumers will work for them in the future. With over 4,000 decentralized autonomous organizations already in existence and with over $8 billion in their treasuries, they represent a new wave of corporate organizations that cannot be ignored.

However, some people call DAOs anarchists, since such organizations have no real hierarchy, no CEO, no supervisors, no board of directors, and no boss. Instead, DAOs operate as collectives on blockchain technology where the traditional back-office functions of the employer, such as recording hours, issuing payments, and approving and executing contracts, are performed by computer. Despite all the negative opinions about DAOs on media platforms, these organizations have become popular structures for contractors, investment clubs, charities, independent networks, hedge funds, and philanthropy.

But a haunting question about DAOs that no one can fully answer is: Who within the DAO is responsible if something goes wrong?

Lawyers beginning to specialize in the growing field agree that this is an interesting question and one that sparks serious debate, but it is far from settled.

Because the DAO is decentralized, all proposals and decisions are made by the members, who may or may not be considered partners in the traditional legal sense.

If a DAO is treated in court as a general partnership, then each member of the DAO would be treated as 100% liable for any lawsuit against them, with all their personal assets at stake.

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