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Legal and Organizational Implications of DAOs



In the complex and evolving world of Decentralized Autonomous Organizations (DAOs), navigating the legal and organizational challenges is crucial. Tara Merk, a distinguished researcher from DAO Science, plays a pivotal role in this exploration. DAO Science, a nonprofit project, focuses on catalyzing impactful work on DAOs and other digitally-constituted organizations. As one of the three brilliant minds behind this initiative, Tara recently contributed to a significant research paper titled: “Open Problems in DAOs.” Her work in this area offers invaluable insights into the intricate relationship between legal frameworks and the innovative structures of DAOs.

In her analysis, Tara delves deep into the legal complexities surrounding DAOs, shedding light on the vital intersection of digital innovation and traditional legal systems. Her expertise and research are instrumental in understanding the dynamic interplay between these new forms of organizations and existing legal and regulatory environments.

Navigating Legal Complexities in the DAO Landscape

Tara Merk's expertise, though not directly in the field of law, provides a unique vantage point for understanding the legal intricacies surrounding DAOs. "The law section was really something that I find so interesting, touching on a number of things we've just been discussing," Tara begins, highlighting the multifaceted nature of legal issues in DAOs. 

She brings to the forefront a fundamental problem: the classification of digital entities like DAOs in the existing legal system. "Is Bitcoin an organization? It's a philosophical debate or argument. But where it becomes very real is when lawyers start classifying," she explains, emphasizing the challenges in defining DAOs within traditional legal categories.

The Conundrum of Legal Classification and DAOs

Tara delves into the intricacies of how DAOs intersect with legal classifications. The current legal framework struggles to categorize DAOs, often trying to fit them into existing structures like LLCs or general partnerships. This approach, however, fails to capture the unique essence of DAOs. "Developing this understanding from a foundational, philosophical level – like what even is a DAO, and what are the different types – but connecting that back to how external regulation views what we've created," Tara articulates, pointing out the necessity for a new legal perspective tailored to the nature of DAOs.

The Concept of 'Exit to Community'

One of the most intriguing aspects Tara discusses is the concept of 'exit to the community.' This idea stems from questioning why large internet platforms and sharing economy businesses are operated by someone other than their primary users and contributors. "Why big internet platforms and sharing economy platforms like Twitter, Airbnb, and Uber aren't run by the people who use them and contribute to them, like driving the car or creating the content. Why don't we have a say in those platforms, and maybe a revenue share, including employees? The governance would be a different thing, but this is a really interesting question in how you get there." she says. 

This concept leads to more profound questions about governance, ownership, and revenue sharing in such platforms, and whether DAOs could provide a viable framework for this type of community-driven operation.

community-driven operations in DAOs

DAOs and Traditional Jurisdictions: A Clash of Concepts

A significant challenge Tara highlights is the contradiction when trying to incorporate DAOs within traditional legal jurisdictions. She questions, "If I incorporate as a Cayman trust, then it's a DAO but also really a Cayman trust." This situation creates a paradox where the DAO exists both as an online decentralized organization and a legally bound entity within a specific jurisdiction, leading to potential conflicts and contradictions in its operation and governance.

The Future of DAOs: Legal Recognition and Regulation

Looking ahead, Tara envisions a scenario where DAOs are recognized and regulated based on their unique characteristics, rather than being forced into existing legal frameworks. She suggests an innovative approach where DAOs could be classified based on certain requirements visible on-chain or in accompanying documentation. "Jurisdictions coming in from the outside to recognize and regulate in their own way," she proposes, envisioning a future where DAOs operate seamlessly across international boundaries, governed by a protocol that transcends traditional legal constraints.


Tara Merk's insights into the legal and organizational challenges facing DAOs highlight the need for a revolutionary approach to understanding and regulating these novel entities. Her exploration of these issues not only raises critical questions but also paves the way for innovative solutions that could redefine the relationship between digital entities and legal frameworks. As we venture further into the realm of DAOs, the perspectives and questions raised by experts like Tara will be crucial in shaping their legal and organizational future.

Stay tuned for further insights into the innovative world of Decentralized Autonomous Organizations, where Tara and the DAO Science team continue to explore and define the future of DAOs.

In addition to these insights, for those who are eager to delve deeper into the world of DAOs, an excellent resource is the “Just DAO It” podcast hosted by Adam Miller. It's an essential listen for anyone interested in the practical aspects of DAO operations, the future of decentralized governance, and the legal intricacies surrounding DAOs.

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