Alabama has become the second state in the United States to grant legal status to decentralized autonomous organizations under the Decentralized Unincorporated Nonprofit Association Act.
Summary
- Alabama granted legal status to decentralized autonomous organizations under the DUNA Act, becoming the second US state after Wyoming to do so.
- The law provides DAOs with legal recognition and limited liability protections, allowing them to operate, contract, and hold assets within a defined legal framework.
The DUNA Act, introduced in February by Republican Senator Lance Bell, provides legal recognition and limited liability protections to DAOs after passing 82-7 with 16 abstentions on March 17.
According to data from CoinLaw, there are over 13,000 DAOs across the globe, with roughly $24.5 billion worth of assets under their control. The key goal behind this framework is to offer clarity on how DAOs exist and operate within the legal system.
Alabama Governor Kay Ivey has now signed the bill into law, according to a16z Crypto’s head of policy and general counsel, Miles Jennings.
In a recent X post, Jennings said, “Decentralized governance is essential to crypto’s future—it’s one of the core constructs in market structure legislation.”
The bill will give decentralized communities “the certainty to build, govern, contract, and scale in the real world,” Jennings explained.
However, there are certain requirements that organizations must meet to qualify as a DAO. First, a DAO must have at least 100 members for a common nonprofit purpose, such as governing a blockchain network or smart contract system.
These entities can operate through blockchain technology and smart contracts, and voting, proposals, and consensus mechanisms can all be stored on-chain. Such entities will have full legal entity status, which means they can own property, enter into contracts, and sue or be sued.
This will offer individual members protection from personal liability in cases of disputes arising from DAO operations.
“As federal crypto market structure legislation moves closer to becoming law, builders need effective domestic legal structures,” Jennings said.
Back in 2024, Wyoming became the first state to grant legal status to DAOs under the DUNA Act.
Earlier this month, a similar DUNA bill was introduced in West Virginia by Representative Tristan Leavitt in February and is now awaiting the governor’s signature.
