CFTC wins Ooki DAO case, setting precedent that DAOs can be held liable

Quick Take

  • The Commodity Futures Trading Commission won a default judgement against Ooki DAO after the group failed to respond.
  • The first-ever case against a decentralized autonomous organization establishes that DAOs can be held legally liable for their actions.

A federal judge ruled in favor of the Commodity Futures Trading Commission after Ooki DAO failed to respond to an enforcement action taken by the commodities regulator.

The judgement sets a precedent that other decentralized autonomous organizations could be held liable for legal violations as a "person" under the Commodity Exchange Act and the court found that Ooki violated the law as charged. The precedent may open the door to future actions against DAOs and decentralized exchanges in the near future.

“The founders created the Ooki DAO with an evasive purpose, and with the explicit goal of operating an illegal trading platform without legal accountability,” said CFTC Division of Enforcement Director Ian McGinley in a release. “This decision should serve as a wake-up call to anyone who believes they can circumvent the law by adopting a DAO structure, intending to insulate themselves from law enforcement and ultimately putting the public at risk.”

Multiple amicus briefs filed on Ooki's behalf argued that DAOs should not be treated as a singular entity and that the government should have to individually identify and summon each member of the DAO before the case could proceed.

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The CFTC issued an enforcement action against the decentralized trading platform last September to stop Ooki from allowing retail commodity trading of digital tokens without registering with the CFTC. Ooki DAO, which established the exchange, did not respond in court after multiple summons were issued to them electronically. The court found Ooki civilly liable for operating an illegal trading platform and unlawfully acting as a futures commission merchant.

As a result of the default judgement, the exchange has been ordered to cease doing business in the U.S. and prohibited from doing business with any entity registered with the CFTC, which could include non-U.S. companies. The order also directs Ooki DAO and "Any person or entity providing web-hosting or domain-name registr