New Court Ruling Finds Lido DAO Members Liable as Partners

Lido DAO members can be held liable under partnership laws, according to a new federal court ruling in California.

What’s the scoop?

• Yesterday, a California federal court ruled that Lido DAO, the governing body behind the popular liquid staking protocol Lido, can be treated as a general partnership under state law.
• The court dismissed Lido’s argument that it is a non-legal entity, holding its members liable despite the DAO's decentralized nature. The court cited token holder involvement in decision-making and earning staking rewards as evidence of co-ownership of a profit-driven business.
• Venture firms including Paradigm Operations, Andreessen Horowitz, and Dragonfly Digital Management were implicated as general partners, with the case stemming from a class-action lawsuit filed by Andrew Samuels, who claimed Lido’s native LDO tokens were sold to him as unregistered securities.

Bankless take: 

The California court ruling that Lido DAO members could be held liable under partnership laws raises significant concerns for decentralized organizations. The court has established a precedent that decentralization alone doesn’t shield participants from liability.

Furthermore, the ruling challenges the assumption that DAOs operate outside traditional legal frameworks and could set a precedent for similar cases, reshaping the legal landscape here. If this ruling stands, DAO members face increased legal exposure, which could impact their decision-making and cause a broader shift toward more regulated approaches like the Wyoming DUNA model.