How Do You Sue A DAO?

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.

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