Alabama Signs Law Granting DAOs Legal Status

Alabama Governor Kay Ivey signed legislation on Wednesday granting legal recognition to decentralized autonomous organizations, or DAOs, making the state the second in the U.S. to provide such entities with a formal framework for operation. The measure, known as the Decentralized Unincorporated Nonprofit Association Act, or DUNA Act, establishes DAOs as unincorporated nonprofit associations capable of owning property, entering contracts and engaging in legal proceedings while shielding members from personal liability.

The bill, Senate Bill 277, was introduced in February by Republican state Senator Lance Bell. It passed the Alabama House of Representatives on March 17 by a vote of 82-7, with 16 abstentions, before advancing to the governor's desk. Under the new law, a qualifying DAO must consist of at least 100 members united by mutual agreement for a common nonprofit purpose, such as governing a blockchain network or smart contract system. These organizations can use blockchain technology and smart contracts for governance, with voting, proposals and consensus mechanisms recorded on-chain. While DAOs may conduct profit-making activities, they cannot distribute profits to...