[Discussion] The DAO needs a serious discussion about legal structure

How about this construction for shielding US MKR holders:

  • It’s possible to lock up your MKR in a contract which removes your voting power.

  • You get it back after a set period of time, on the condition that emergency shutdown hasn’t been triggered in the meantime.

  • You receive a small interest rate for the opportunity cost.

  • The lock-up period is automatically extended at the end of the term with a new term, unless you explicitly indicate that you want to withdraw at the end of the current term.

  • The contract is 100% permissionless.

  • If your MKR is in the contract, you’re covered by the self-insurance fund.

Emergency shutdown is a credible risk of forfeiture. And if ES is triggered, any MKR holders fate is up to the social contract anyway so you don’t lose much.

I think this should remove any taxation obligations due to the forfeiture condition, and the liability risk because it removes voting power (control).

This is a simple contract to develop and could be deployed in a matter of weeks.

Only the interest rate and the self-insurance fund features require permission from Maker governance. Anyone could develop and deploy their own version without those features today to get started.

(Don’t put all your MKR in a contract you developed in a day.)


Our major problem isn’t securities regulators. We have cash for fines and even a draconian enforcement action then tells us what we need to remedy.

Our problem is mainly that of liability and taxation. Maker in the US will almost assuredly be seen as a general partnership. I have yet to hear a lawyer say It would not be.

That leaves all members on the hook for any perceived damages, taxation, and possibly criminal activity. I’m not sure about you, but I don’t think anyone here has the money to pay the IRS if they decide that Maker is a US entity and decide to treat as income the $400+ million batch of tokens provided by the Foundation. My understanding is the only way around this is simply that Maker itself meet any claimed obligations. If we wanted to dispute them, that would also be best handled at the level of any supposed general partnership — otherwise you have partners cutting deals to avoid being left holding the bag .

So we need a shield around all our members — not only those who live in or have seizable assets in the US. We also need to definitively establish jurisdiction for Maker to live in so we don’t suddenly find not just the US, but multiple countries claiming Maker owes taxes on the same income.

Nothing about this says the protocol itself has to change. Or our internal governance processes. Or even whether DAI is decentralized, as the GC at dydx kindly reminded us that simple filings of required paperwork don’t count as managerial efforts.

But the first level of compliance is paying taxes — preferably in a single jurisdiction we choose now and not half a dozen that decide they can pick on a stateless DAO.

And the first level of protecting our members and workforce is to have an entity that can stand between them and authorities/civil courts.

We can figure out whether and how to do less basic stuff once we know what laws do/do not apply to Maker — much of which will be affected by jurisdiction and domicile.

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Overall I think it’s a very important discussion to have, and in particular focusing on tax both reactively in the US (as they are looking to do a tax crackdown on crypto) and proactively in the rest of the world. The way to peacefully coexist with governments is to pay some sort of tax on the economic activity done within their borders (e.g. stability fees from real world assets).

So we need a shield around all our members — not only those who live in or have seizable assets in the US.

This simply isn’t possible. There’s no way to force someone to join such a group, and there is also no way for such a group to control Maker Governance. However, I do think, as Wouter also suggested above, that it makes sense for Maker to dedicate resources and make a commitment to proactively protect MKR holders in the US who may otherwise get spooked and dump their tokens, or quit their jobs in Core Units.


MakerDAO does need a serious discussion about legal structure. I fully agree with this statement.

Also, I do recognize that some of the risks which are being mentioned are real.

That said, some of the presumptions made seem at best premature. Some examples:

Strongly disagree here. As soon as we do that, we would put ourselves at the mercy of such a country. Consider a scenario in which they ban stablecoins in the future.

Well, not sure at all. Such a key decision would have profound consequences for all aspects of MakerDAO.

First of all, I am not quite sure if all MKR holders would actually describe themselves as “members” of the DAO. I am even less sure if all MKR holders would be actually interested in becoming involved in any new legal structure.

If we accept the bold claim that MakerDAO was a US-based “general partnership” at the time of receiving MKR treasury, how would a potential conversion to a legal entity protect us now? I don’t want to discuss this matter here, just using this question as some caution that we should look for well-though solutions which actually solve problems.

Let’s try not to throw the baby out with the bathwater. I like Wouter’s idea because it provides some immediate relief for concerned MKR holders, while allows us to not make rushed decisions.

I appreciate @PaperImperium 's push for bringing up this topic, and I actually think that this is one of the greatest challenges for MakerDAO. If we do not get it right, Maker can fall. I we do get it right, that would be a huge competitive advantage. Let’s exit the panic mode and focus on solutions.


This is certainly a major concern. Which is why if we chose to do this we would need to shop carefully for a favorable jurisdiction.

What is the alternative, though? Being stateless means there is no system of tax treaties to prevent many nations pursuing us at once. Paying taxes in a recognized jurisdiction would — if done correctly — prevent a dog pile of other jurisdictions claiming us as their own and demanding we prove otherwise.

Open to suggestions, but most nations are becoming more aggressive in capturing tax revenue. Maker will not go unnoticed and has few methods of defending against accusations that it’s revenue is derived in some unfavorable tax jurisdiction

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My current thinking (and I think that you would agree) is that any hostile tax / regulatory action against Maker would need to be directed against some of the individuals / entities engaged in MakerDAO (in other words, some individual elements of the decentralized structure around the Maker Protocol).

If that is the case, the natural and likely non-controversial next step would be to find some immediate relief for such exposed individuals. On the legal and regulatory side, this is the goal of the Self-Insurance Fund. On the tax side, Wouter’s smart contract-based solution seems like a step in good direction.

For more long-term solutions, including having some form of a legal entity in place, I would think about what’s the best structure to analyze and discuss.


Is there a country in the world right now with clear regulatory laws around entities like MakerDAO? If not, this seems to be a battle against, as Dick Cheney put it, unknown unknowns.

I’m all for aiming for a competitive advantage in the face of new regulations and to de-risk the DAO’s future as much as possible but I’m not sure if there’s anything concrete we can do with the regulatory clarity we have right now.

As for the US specific comments, it appears that the US government doesn’t know how to regulate this space but is intent on making noise about it. This is leading to panic decisions by other protocols, such as 1inch and dydx who are now asking you to sign that you aren’t in the US if you want to use their platform. That might make sense once there is regulatory clarity - right now, it’s not!


How is that income? The Foundation just gave the community back its tokens. Last time I checked, you give something to someone and they give it back, you don’t consider that income.

Agree with Jacek that there are a lot of assumptions (looking ever more panicked) running through this thread, including that simply “re-centralizing” this disparate group of individuals and companies currently under no common control is a magic wand to cure our supposed ills. And note, trying to incorporate the DAO WILL put a great number of people, at least the CUs, under common control, I believe.


yeah, in any case we could just burn those token and forget about them as in “thanks, gift not appreciated and thrown to the bin”.

If needed, we just mint them back. (LOL)

So, yeah, I don’t really see how anybody could consider that as income.


Not saying it is. But we should view these things from the perspective of those who would make the claims. Characterizing them as a loan from the DAO to the Foundation strikes me as a good retort.

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Thanks everyone for participating. We’ll continue our research as @SES-Core-Unit exploring the 3 topics here:

  • The self-insurance fund
  • Legal structuring for the DAO
  • A smart contract as legal shield for MKR holders

Anyone who’s interested into discussing these with us, feel free to reach out.


I’m very skeptical of any attempt to create a legal entity that represents ‘Maker’. In particular when the justification for doing so relies on broad assumptions. We’ve just undertaken a tremendous amount of effort to shut down the Foundation and break up into decentralized Core Units. Any moves in this direction should not be rushed in a panic and instead need to be carefully scrutinized from every angle.

Frankly, I don’t think we community members, nor Core Unit contributors, are remotely qualified to speak on the credible threats to the DAO, its members, and the potential legal constructs that might mitigate those risks. Apologies if this comes across as insensitive, but I find it quite irresponsible how people in this thread are using arm-chair lawyer legal interpretations and media sound-bites to justify action. Any brash action could jeopardize years of carefully constructed legal positioning. This reinforces the need for one or more Legal Core Units who have the expertise to navigate through such complex issues.


Here is a proposed structure for DAOs from a16z. Linked here for further discussion.


TLTR: I’m writting a research paper about DAO’s and how they could be established in Liechtenstein and need mentorship for ideas and advisory regarding MakerDAO & DAO’s in general.

Hi all together

As this is my first post ever in the forum I’m not quite sure if this is the right manner (even though @discobot was a great mentor).

I read this article as part of my ongoing research project just a few days ago and stumbled into Maker.

Let me introduce myself briefly. Currently I am in my final year of my undergraduate study program. During my studies I got deeper into crypto and developed a keen interest for the field of legal studies. Especially the field where crypto and the off-chain world meet is a bloody battlefield of legal challenges and fascinating to explore.

As I wrote earlier, I just started writing my bachelors thesis. The topic of my research is the question: What makes a DAO and is it possible for a DAO to gain the legal status of a legal entity in Liechtenstein?

Why exactly Liechtenstein you might ask?

First I’am studying and working in Liechtenstein. But especially regarding crypto Liechtenstein is one of the most forward pushing jurisdictions in the whole world as you might know already.

Back in 2019 Liechtenstein introduced the token and trusted service provider act. A law made for blockchain and crypto. If you want to learn more here is a comprehensive summary.

My current structure is split. First, I really want to present what a DAO is. To show really the core ideas and motivation (decentralisation, liberty, independence, innovation…) why do DAO’s exist.

The second half will be a detailed analysis if the current law in Liechtenstein allows for a DAO without restricting fundamental ideas and motivation.

If the answer is yes, I will propose a framework how to establish a DAO within the jurisdiction of Liechtenstein.

If the answer is no, I’ll put together a catalogue of suggestion for both the legislation, where law must be altered, or new laws have to be implemented to allow for a truly decentralised autonomous organization. And, for DAO’s to better fit into the current corporate law of Liechtenstein (without restricting itself beyond the cause).

I would love to use MakerDAO as my example to better explain the how and what of DAO’s. And present my findings to the community. You would get a scientific researched and conducted legal analysis if MakerDAO could exist in Liechtenstein. I cannot give you a direct legal opinion as e.g., a corporate lawyer but maybe test the jurisdiction of Liechtenstein in the eyes of MakerDAO.

Because I’m relatively new to the whole crypto space and of course the DAO communities I would need some mentorship, members who are willing to answer question about DAO’s, history of MakerDAO, structure… furthermore guide me into the right directions where I can find more literature or things I could check for more ideas. In short give me guidance and navigation along the way.

I would really like to contribute to the cause of MakerDAO.

If you read until here, please feel free to share your opinion about it and connect me to people who might be interested.

I hope this thread is rightfully placed and @discobot bot will not sentence me.


Hi! To find out what I can do, say @discobot display help.

You are welcome to ask here or https://chat.makerdao.com

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Fire away with questions and we’ll provide some thoughts. Thanks for thinking of Maker for your academic project.


Thank you, just found about the discord sometime later and after soem intitial confusion I made it. :+1:


Thank you @Whitescroll for your interest! Indeed, the discussion about legal structures of DAOs is very important and complex, so it has be be framed appropriately. For me, finding the “perfect” legal wrapper for a DAO makes little sense, as DAOs (digital, transnational, decentralized, fluid ) and legal entities ( paper based, national, centralized, rigid) are inherently contradictory. Submitting a DAO to a particular jurisdiction would defeat its purpose. However, finding appropriate legal structures at the periphery of the DAO that wrap specific functions, product features or specific Core Units (which could be considered as mini DAOs) makes a lot of sense, specially for mitigating liability and tax risk. We are looking at structures like US Unincorporated Non Profit Associations (@SES-Core-Unit will host in December a public call with Miles Jennings GC from a16z who recently proposed this structure), Delaware series LL.Cs, Cayman Foundations, Swiss Associations (Verein) and other hybrid structures (Wyoming’s DAO LL.C.,Open Law’s Ricardian LL.Cs .) each valuable for specific use cases. Happy to provide feedback on your research about applicability of Lichtenstein entities in the context of MakerDAO.


Hi @layerzero thank you very much for your offer. Your point about the fact that DAO’s might be too different to be put in the context of souverain national law is something to think about. But with what I am learning about the DAO e.g., “Case for clean money” DAO’s will need a way to interact easier in the off-chain world, so at some point some kind of legal structure is needed.

But this is exactly why I build this two-sided approach. I do not want to put a DAO into the bag of some countries legislature but want to explain to people why this would and in your own words: “defeat the purpose”.

And I prepared myself already for the very certain possibility that a DAO like Maker cannot exist in the legislature of Liechtenstein.

At least this is what I keep telling myself :slight_smile:

Another circumstance which at least from my understanding makes the whole topic quite interesting is what is “most important” and what is not making “a big difference” with regard to e.g., location of the DAO, liability of members, statues, tax implementations.

Do you think I should make my own thread where I post updates, ask for input & more. Because right now I think it collides a little bit with the general topic of this thread.