Could Lido DAO Members Be Held Liable?

A California court has determined that Lido DAO, the decentralized organization overseeing the liquid staking protocol Lido Finance, qualifies as a general partnership. The court dismissed arguments that the DAO is not a legal entity, as reported by Decrypt based on court filings.

The ruling means that identifiable members of Lido DAO who played a role in its operations could face legal liability.

This decision follows a class-action lawsuit filed in December 2023 by plaintiff Andrew Samuels, who claimed financial losses after purchasing LDO tokens on the Gemini exchange. Samuels alleged that the tokens were sold as unregistered securities.

LDO, the governance token of Lido DAO, allows holders to participate in decision-making for the Lido Finance platform. Learn more about the Lido liquid staking protocol and its LDO token in our article.

To better understand the context, check out our guide on decentralized autonomous organizations (DAOs). This case could set a significant precedent for DeFi and the broader cryptocurrency industry.

In his ruling, Judge Vince Chhabria noted that the lawsuit raises critical questions about whether individuals in the crypto space can avoid liability by creating new legal frameworks.

Miles Jennings, General Counsel and Head of Decentralization at a16z crypto, commented on the ruling via X:

Under the ruling, any DAO participation (even posting in a forum) could be sufficient to hold DAO members liable for the actions of other members under general partnership laws.