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The Regulation DAOnload
The Tally Newsletter, Issue 101
Welcome back to the Tally Newsletter, your weekly source for DAO governance insights. I'm coolhorsegirl and I’m so stoked to be here. 🟣
The CFTC won its lawsuit against Ooki DAO just a few days ago, with the ruling stating it ran an illegal trading platform. Besides that, DAOs exist within a space where regulation is ALL the talk these days. In this issue, we’ll unpack how the latest in the crypto regulatory climate touches the DAOsphere. Legal wrapper wen?
Arbitrum voting in the form of AIP 1.2 is LIVE! We’ll also cover a few proposals touching on the summer conference series from Gitcoin and Nouns. Let’s get into it 👇
🤿 Deep Dive: The Regulation DAOnload
Coinbase. Binance. Could DAOs be the next victim of legal wrath? While the autonomy and borderless nature of DAOs may feel like the crypto-version of utopia, it also opens up a Pandora's Box of potential liabilities, especially in the U.S., where the regulation fire is fueled on the daily. The crux of the issue lies in the personal liability that DAO members may unknowingly shoulder due to their participation.
Case in point is the recent Commodity Futures Trading Commission (CFTC) enforcement action against bZerox (bZx) DAO, which resulted in a $250,000 civil penalty. The DAO's co-founders, who were also voting token holders of its successor Ooki DAO, were held personally liable. This landmark decision potentially exposes ANY member who participates in DAO governance to legal risks.
But of course, the CFTC's decision to hold token holders personally liable was not without controversy. CFTC Commissioner Summer K. Mersinger issued a dissenting statement, critiquing the decision as "arbitrary" and potentially discouraging active participation in DAO governance. At its best, this decision means stifling participation. At its worst, it is not dissimilar from voter suppression.
That said, some states have taken steps to shield DAO members from such personal liabilities. Wyoming, Vermont, and Tennessee have all enacted legislation aimed at providing some legal cover to DAOs and their members. Wyoming even introduced a bill that would establish DAOs as a form of LLCs, offering a potential additional DAO legal wrapper. However, it's worth noting that critics argue these legislations may impose additional burdens on DAOs without offering substantial benefits.
Amidst this, we have the classic “omg did you hear about…!?” case of bZx DAO, which found itself at the center of a class action lawsuit following a phishing attack that resulted in a theft of $55 million. The lawsuit filed, but the decision remains to be made. The outcome of this case is set to establish the standards for founder and manager liability for DAOs, setting a legal precedent that could influence the future of DAO regulation.
As we voyage onward in this thrilling, unpredictable, and enigmatic epoch of DAOs, these concerns, along with others, persistently mold the landscape. It's a testament to the intrinsic dynamism of this space: constant evolution. As the drumbeat of regulation amplifies, the stakes tied to DAO governance may well rise in concert. Until then, check out the DAO Research Collective’s survey DAO legal wrappers.
⌛️ On-chain Proposals
On-chain DAOs are decentralized autonomous organizations that operate entirely on the blockchain, using smart contracts and other blockchain-based technologies for its operations and decision-making processes. Tally believes that true DAOs operate on-chain.
Summary: Keen to dust off your conference badges? Gitcoin is eyeing an investment of $160k to catapult the "Funding the Commons" series into the limelight, fostering collaboration, strengthening its own stature, and leading the charge in the EVM-based public goods funding ecosystem.
Voting ends: June 17th
Summary: A 3-prong deal regarding the 7.5% of the $ARB tokens distributed to the Foundation’s “Administrative Budget Wallet”. The Administrative Budget Wallet will be used in pursuit of the Foundation’s mission statement.
Voting ends: June 25th
Summary: ArbitrumDAO is ready for a spring clean, proposing amendments to sweep references to AIP-1 out of the Constitution, Bylaws, and A&R M&A while sprucing up with community-suggested changes. From lowering the threshold for an AIP to be posted on-chain to clarifying the realm of the Administrative Budget Wallet, it's all about making the governance house tidier and more user-friendly.
Voting ends: June 24th
Summary: For $57k, the Nouns Town crew has an ambitious plan to crash San Diego Comic Con 2023 with 2,500 Nouns Activity Books, aiming to charm artists and collectors with some Nounish creativity and commission over 100 Noun-styled artworks from industry professionals.
Voting ends: June 17th
Summary: The proposal calls for 10 x 5 ETH grants (50 ETH total) for Nouniversary celebrations, showcasing nouns culture, people, and creations. The plan includes requirements for maximizing attendance, merch provision, support for nounish businesses, and documentation of the events.
Voting ends: June 19th
Summary: This proposal suggests making a substantial 100 ETH donation to the ultra sound relay, which is the largest MEV-boost relay by market share and plays a pivotal role in maintaining Ethereum's censorship-resistant properties. The relay operates as a public good funded by donations and the proposed funding is meant to recognize the team's accomplishments and support their ongoing operations.
Voting ends: June 17th
📝 10 Things To Read or Listen To
📄 “Web 3.0: Decentralized Governments” by Dmitry Mishunin
📄 “The Future of DAOs: Trends, Challenges, and Opportunities” by Cypherock
📄 “Rollups, Rigor, and Reality” by Kelvin Fichter
🧵 “DAOs are stuck between a rock and a hard place” from Hasu
🎧 “What’s broken in the DAO Governance? w/ Daniel Ospina“ on DAO Today
🎧 “Uniswap Fee Switch, Lido FUD & Endgame Craziness, on Bell Curve
🎧 “Monetizing web3 social w/ Nir Kabessa“ on On the Other Side
💫 DAO Talk: that 1st proposal feeling || DT weekly #42
🤭 Meme of the Week
In honor of the release of last week’s Issue 100 of the Tally Newsletter, check out our thread recapping the most opened issues: Tally Newsletter by the numbers.
~ coolhorsegirl 🐴
p.s.- First week in Thailand! Feeling a greater solidarity with elephants now more than ever.