If an Organization Exists Only in Computer Code, Can It Be Sued? | New York Law Journal – Law.com
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ANALYSIS
This article will discuss how the cryptocurrency industry created DAOs and how they function. It will then explain how U.S. District Court Judge William W. Orrick permitted a unique use of technology to effectuate service.
December 12, 2022 at 11:00 AM
7 minute read
The Commodity Futures Trading Commission (CFTC) has an interest in preventing unregulated trading in the commodities industry. In September 2022 the CFTC filed an action against Ooki DAO, an entity focused on cryptocurrency trading, in the Northern District of California. The first problem confronting the CFTC was that it had to serve the defendant, which was organized as a “Decentralized Autonomous Organization” (DAO). However, this form of organization had no officers, no business offices, no employees, and no recognized agent for service. It was a ghost entity that existed only through a series of computer programs. The CFTC proposed a novel solution which the District Court approved. This article will discuss how the cryptocurrency industry created DAOs and how they function. It will then explain how U.S. District Court Judge William W. Orrick permitted a unique use of technology to effectuate service.
The cryptocurrency industry is based on the unique characteristics of computer-based blockchains. A blockchain is a computer-based ledger that is widely distributed, shared and immutable. Users of a ledger can initially record, and then permanently track, the owners of a digital asset like a cryptocurrency token or an NFT (Non-Fungible Token). One advantage of cryptocurrency is that it allows for peer-to-peer transfers of value without the intervention of a bank or other institution. There are also physical world functions for blockchain technology, such as product logistics, real estate title registration and health care contracts.
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