What Are Decentralized Unincorporated Nonprofit Associations (DUNAs)
Decentralized Unincorporated Nonprofit Associations (DUNAs) are a new type of legal entity recognized under Wyoming's recently enacted Decentralized Unincorporated Nonprofit Association Act. This groundbreaking law, which takes effect on July 1, 2024, provides a legal framework for the formation and operation of decentralized autonomous organizations (DAOs) in the state.
A DUNA is defined as an unincorporated nonprofit association with at least 100 members that is formed under the act and not any other Wyoming statute. DUNAs are permitted to engage in profit-making activities to further their nonprofit purposes.
One of the key features of DUNAs is that they can utilize blockchain technology, including smart contracts, for their governance and operations. The governing principles of a DUNA may be contained in smart contracts on a blockchain, allowing for transparent and automated decision-making processes.
Under the act, DUNAs have legal entity status separate from their members. This provides liability protection for DUNA members and administrators, shielding them from personal responsibility for the debts and obligations of the organization.
Membership in a DUNA is based on the ownership of a membership interest, which grants voting rights. A member's voting power is proportional to their membership interest. The act allows membership interests to be freely transferable, enabling members to buy, sell, or transfer their interests as they see fit.
Major decisions in a DUNA, such as selecting or dismissing administrators, amending governing principles, and dissolving the organization, require the approval of a majority of membership interests. The governing principles of a DUNA may specify additional matters that require member approval.
DUNAs have perpetual existence under the law unless otherwise specified in their governing principles. The act outlines specific methods for dissolving a DUNA, including through provisions in the governing principles, member approval, or court order. The act also provides for the merger of DUNAs with other organizations and the conversion of DUNAs to other legal entity types by following specified procedures.
The Wyoming Decentralized Unincorporated Nonprofit Association Act is the first law in the United States to provide a comprehensive legal framework for DAOs. By recognizing DUNAs as legal entities, Wyoming has taken a significant step towards legitimizing and regulating decentralized organizations.
The act's provisions strike a balance between the decentralized nature of DAOs and the need for legal clarity and protection. The use of blockchain technology and smart contracts allows for transparent and automated governance, while the legal entity status provides a measure of stability and certainty.
As the first state to legally recognize DAOs, Wyoming is positioning itself as a leader in the blockchain and cryptocurrency space. The act's clear and comprehensive framework may attract DAO formation and innovation to the state, as organizations seek a welcoming legal environment for their operations.
Other states may follow Wyoming's lead in the coming years, introducing their own legislation to recognize and regulate DAOs. This could lead to increased competition among jurisdictions to create the most favorable legal conditions for decentralized organizations.
The Wyoming Decentralized Unincorporated Nonprofit Association Act represents a significant milestone in the evolution of DAOs and their legal recognition. As more organizations adopt decentralized governance models, the act provides a template for how these entities can be structured and operated within a legal framework.
While the full impact of the act remains to be seen, it is clear that Wyoming has taken a bold step forward in legitimizing and regulating decentralized organizations. As the law takes effect and DUNAs begin to form and operate within the state, it will provide valuable insights and lessons for other jurisdictions considering similar legislation.
