Crypto DAOs and Their Token Holders Aren’t Safe From the CFTC
A recent enforcement action by the Commodity Futures Trading Commission signals that the community-run projects popular in crypto known as decentralized autonomous organizations, or DAOs, are within the purview of the agency's oversight -- as are the millions of people who hold DAO governance tokens that are used to make decisions.
The CFTC on Thursday filed and settled charges against bZeroX LLC and its founders Tom Bean and Kyle Kistner for illegally offering “leveraged and margined retail commodity transactions in digital assets,” among other charges. Simultaneously, the CFTC filed a federal civil enforcement action in the U.S. District Court for the Northern District of California charging the Ooki DAO — a decentralized effort that bZeroX converted into last year -- with violating the same laws, holding it liable as an “unincorporated association.”
The action may have big implications for the nearly 5,000 DAOs in existence, about 2,300 of which have assets of more than $1 million, according to tracker DeepDAO. Many crypto projects have transformed themselves into DAOs -- organizations governed by holders of special tokens -- over the past year, partly in hopes to avoid regulatory scrutiny. Some of these crypto apps don't check their customers' identities, or otherwise comply with many existing financial-industry laws.
“I think this is an important action, because it highlights that regulators need not be dissuaded by claims of decentralization,” said Hilary Allen, a law professor at American University. “Ultimately, there are always people who establish and run crypto services, even if they seek to hide from regulators by using a DAO. The CFTC has set a precedent for seeing through the decentralization rhetoric
Read more on tech.hindustantimes.com
