Wyoming Enacts Law Establishing Nonprofit Legal Framework for DAOs

Starting this summer, Wyoming will implement a new system to manage and incorporate decentralized autonomous organizations as nonprofits (DAOs).

Governor Mark Gordon signed the Decentralized Unincorporated Nonprofit Association Act (DUNA), providing a framework for DAOs with at least 100 members to become unincorporated nonprofit associations. The law takes effect on July 1, 2024.

The bipartisan bill passed in the Wyoming House with a 50-10 vote, supported by four Democratic Representatives. Introduced in February, the Act passed the Senate last month in a 23-7 vote, with four Democrats in favor.

Under the law, registered DAOs as nonprofits can "engage in profit-making activities," directing proceeds back to their "purpose." They are also permitted to acquire and transfer property, including tokens.

According to Miles Jennings, general counsel at a16z crypto, Wyoming's new law allows blockchain projects to operate within applicable laws without compromising decentralization, keeping them permissionless.

In 2021, Wyoming passed the Wyoming Decentralized Autonomous Organization Supplement Act, integrating DAOs into the existing limited liability corporation (LLC) laws. Governor Gordon signed amendments in 2022, clarifying aspects of DAOs that didn't align with LLC policy. The amendments recognized DAOs as "member managed," "algorithmically managed," or operating with "any smart contract capable of being updated," among other things.

Preston Byrne, partner at Brown Rudnick, sees Wyoming's latest law as a significant improvement, addressing past legislation that he considered inapplicable to crypto-native entities.

“The DUNA looks like it fixes most of this,” Byrne said Friday on X. “The DUNA introduces a few new concepts by e.g. permitting the conferral of membership automatically if someone ‘becomes a member in accordance with the governing principles’ of the organization — not articles, but ‘principles’ — and acknowledging that the purchase of such interests can be conferred through the transfer of property [like] a token.”