Self Insurance Fund

@layerzero At a minimum level I would see teams operating with a very lean balance sheet, if all part of the same structure. So that their personal liabilities are not involved. Maybe an optional setup is as a non-profit or foundation generating no profit. Only the funds used to pay contributors and services required to run (e.g. software etc).

2 Likes

Like a coop? Not being for profit does open up other non-equity entities like unincorporated associations

I like this idea. One factor that complicates this issue is the fact that any counsel retained by Core Units is ultimately going to put the CU’s interest ahead of the DAOs so while I like the idea of CUs retaining counsel and sharing advice, I think paying for opinions to be delivered collectively to key stakeholders on a private call would be a good way to help ensure we’re receiving sound advice. I’m happy to help organize if anyone’s interested in making this happen.

1 Like

There are a few options, indeed. e.g. NFP, foundation etc. But the important thing is that:

  1. the financial activity happening inside is kept transparent as per MKR voted budgets
  2. contracts can be signed (e.g. independent contractors, employees etc)
  3. protection of liability for contributors

This makes the conversation of transparency for budgets, expenditure and account reporting way simpler. Plus contributors working inside don’t expose their family mortgage equity & other personal assets to legal actions, which they are at the moment. My understanding is no limit on consequential losses means no cap (your house + everything else) if operating as a sole trader. No amount of wage covers that risk…

2 Likes

Quick note re co-ops (given that I’ve seen them referenced here and in other places): certain state statutes, such as the Colorado Limited Cooperative Association statute and a similar schema in Minnesota, include limited exemptions from state securities laws (“Blue Sky” laws) for patron membership interests. However, there is no outright exemption from federal securities laws for those same membership interests.

Here’s a hypothetical example: if a project like the Uniswap DAO organized as a co-op it would almost certainly consider UNI as evidence of one’s patron membership in the DAO and, as a result, UNI would clearly be a security and subject to burdens in case one wants to transfer that interest across state lines to another individual.

In addition, look at Opolis. Registering with their DAO requires KYC and, I believe, their governance tokens are non-transferable precisely because they are considered securities.

Bottom line, while the cooperative form is interesting and certainly has similarities to how some DAOs operate, it’s not a saviour that solves all the purported securities-related issues for individuals and groups not under common control that happen to work together loosely on a computing protocol.

I will say though, DAOs, in my opinion, function similarly to coops. I just wish there were tweaks to potentially fruitful statutes to really get us (DAOs generally) over the line.

1 Like