• A US district judge ruled in favor of the US Commodity Futures Trading Commission in its litigation against Ooki DAO, ordering it to pay a civil penalty and shut down its website.
• This decision sets a precedent that decentralized autonomous organizations can be held liable when violating the law.
• The CFTC’s enforcement action against Ooki DAO is the first of its kind, with another project called Sushi DAO being subpoenaed by the SEC earlier this year.
CFTC Wins Precedent Setting Case Against Ooki DAO
A US district judge has ruled in favor of the US Commodity Futures Trading Commission (CFTC) in its litigation against Ooki DAO, setting a precedent that decentralized autonomous organizations (DAOs) can be held liable when violating the law. Judge William H. Orrick entered a default judgment order which requires Ooki DAO to pay a civil penalty of $643,542, stop operating in the US and ordering it to shut down Ooki DAO’s website.
Illegal Trading Platform & Registration Violations
The CFTC charged Ooki DAO late 2022 with operating an illegal trading platform and registration violations as well as for failing to comply with the Bank Secrecy Act, such as know-your-customer requirements. The agency called it “a precedent-setting decision” since the court held that Ooki DAO is “a person” and can be held liable when violating the law.
What is a Decentralized Autonomous Organization?
A Decentralized Autonomous Organization (DAO) is an organization which operates based on rules on a blockchain and then executed through smart contracts. This allows large groups of people to make decisions without a central authority. Law firm K&L Gates noted that this case was significant because it shows that CFTC will look into digital asset transactions facilitated by these organizations rather than just their form itself.
SEC Subpoenas Another Project Called Sushi DAO
In March of this year another project called Sushi DAO was subpoenaed by the SEC according to Bloomberg Law. Sushi DAO is an organization behind a decentralized crypto exchange which further adds to speculation regarding how these types of projects are being regulated by authorities within the United States.
Conclusion: Wake-Up Call To Those Who Circumvent Laws
Overall this ruling serves as a wake-up call for anyone who believes they can get away with avoiding laws through making use of these types of decentralized autonomous organizations according to Ian McGinley, director of CFTC’s enforcement division.. Therefore those wishing to operate within these types of projects need to make sure all regulations are followed or else risk facing similar legal repercussions as seen here with Ooki DOA’s case.