​Utah state authorities pass law to legalize DAOs starting in 2024

What’s new? On March 1, the Utah Legislature passed the “Utah Decentralized Autonomous Organizations” Act. According to a blog by law firm Polsinelli, DAOs are a priority for the state and the Blockchain and Digital Innovation Task Force. The law defines the owner/participant base and technological criteria for DAOs and uses the statute to protect the community by ensuring anonymity. In addition, the document imposes quality assurance requirements for DAO protocols, creates a clear tax regime consistent with the functionality of such organizations, and establishes no implicit fiduciary duties on participants.

Polsinelli Blog

What else does the blog say? Utah passed a version of the COALA model law that “provides legal certainty for DAOs and their participants, and unlike other regulatory frameworks, accommodates flexibility for their unique features and further innovation.”

The DAO Act passed through House and Senate committees. Key issues identified during the debate phase include anonymity and unaccountability, proper paperwork from a tax law perspective, and the time it takes for the state Department of Commerce to prepare to review new applications.

In terms of accountability, the compromise was to require the disclosure of DAO founders, while the participant base could remain anonymous. Also, the sponsors of the bill proposed acceptable tax language that is consistent with the structure of a DAO. In addition, the law will not take effect until 2024, giving lawmakers a year to edit, adjust and ensure the practical implementation of the provisions.

The task force will continue to work closely with the Department of Commerce on implementing the act, as well as with the technology, finance, and legal industries, to make sure the project will be effective in terms of needs and goals. The task force will spend the remainder of 2023 examining weaknesses in the legislation and working to address them.

In December 2022, the Marshall Islands authorities were the first in the world to legalize DAOs. In addition, legal entities were able to formally implement DAO structures and governance tools.

For what decentralized autonomous organizations are and how they work, read GetBlock Magazine’s special feature.