The U.S. District Court of California ruled that Lido DAO could be considered a general partnership under state law.
According to Decrypt, the US District Court for the Northern District of California has ruled that cryptocurrency staking platform Lido DAO (LDO) has legal personality and should be classified as a general partnership.
The court rejected claims that Lido DAO had no legal personality, ruling that DAO participants would be held liable despite Lido’s decentralized structure.
The court also ruled that participants managing the operations of the DAO profited from the management and operations, and that Lido could not escape liability due to the absence of direct token sales.
The court ruled that although Lido DAO did not sell tokens directly, its advertising and promotion of tokens through cryptocurrency exchanges constituted a security sale.
In his decision, U.S. District Court for the Northern District of California Judge Vince Chhabria stated:
“The case raises several new and important questions about the ability of people in the crypto space to exempt themselves from liability by creating new regulations to profit from exotic financial instruments.
Under state law, Lido DAO constitutes a partnership when two or more individuals co-own a for-profit business, regardless of whether the individuals intended to form a partnership.”
This case set a precedent for how the legal status of profit-oriented DAOs and the liability of their members should be handled.
According to court documents, plaintiff Andrew Samuels filed a class action lawsuit alleging that he purchased LDO tokens on the secondary market through the Gemini exchange in April and May 2023, but in December of that year, he incurred losses by purchasing the platform’s native LDO tokens, which were sold to him as unregistered securities. The court accepted Samuels’ claims and held Lido DAO responsible for the decline in the value of the LDO token.
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