A recent US District Court ruling on Lido DAO has sent ripples through the cryptocurrency world, profoundly impacting decentralized autonomous organizations (DAOs).
On November 18, 2024, Judge Vince Chhabria of the Northern District of California classified Lido DAO, a prominent DAO in the crypto market, as a general partnership under California law.
Interestingly, while the ruling has caused uproar from the crypto community, the price of the native token of Lido DAO, LDO, has significantly increased.
The ruling that shook DAOs
The case stemmed from a lawsuit filed by investor Andrew Samuels, who alleged financial losses after purchasing Lido tokens during its initial coin offering.
Samuels claimed that Lido DAO violated securities regulations by failing to register its tokens with the US Securities and Exchange Commission (SEC).
Rejecting Lido DAO’s defense that its decentralized nature exempted it from legal obligations, the court ruled that its members could be held liable under state partnership laws.
Major institutional investors—Paradigm Operations, Andreessen Horowitz, Robot Ventures, and Dragonfly Digital Management—were specifically named as general partners, given their significant roles in Lido’s governance.
However, Robot Ventures was dismissed from the case due to insufficient evidence of involvement.
The ruling underscores that even minimal participation in a DAO’s governance could expose members to liability under traditional legal frameworks.
Impact on Lido DAO (LDO) price
Immediately after the ruling was made on November 18, Lido DAO’s native token, LDO, appeared shaken with a dip to around $1.10 on November 20.
However, LDO has since recovered and resumed its bullish rally that it had started at the beginning of November.
At press time, LDO was trading at around $1.5278, up 22% since the court issued its ruling.
Over the past month, LDO has surged by an impressive 50.3% despite being down 39.3% year over year.
This price action suggests that investors may view the ruling as a mixed signal: while it increases regulatory scrutiny, it also positions Lido DAO as a key player in discussions around DAO governance and compliance.
The 14-day RSI indicator is on an upward trend sitting at 67.50, pointing to a possible continuation of the current bullish trend.
LDO price also sits well above the 9-day and 26-day Mas further solidifying the bullish case for the altcoin.
The broader implications
The court’s decision has sparked intense debate about the future of DAOs. Traditionally seen as decentralized entities that evade traditional legal and structural pitfalls, this ruling challenges that notion.
Legal experts warn that participating in a DAO—even through forum discussions—could make members liable for the organization’s actions.
For those involved in DAOs, this case serves as a wake-up call to evaluate their risk exposure. As the crypto industry evolves, balancing decentralization with regulatory compliance has become increasingly complex.
The Lido DAO ruling highlights the growing tension between innovation and regulation, with implications that extend far beyond Lido’s rising token price.
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