Quick Take:
In a significant legal development, the Commodity Futures Trading Commission (CFTC) has secured a default judgment against Ooki DAO after the organization failed to respond. This groundbreaking case establishes that decentralized autonomous organizations (DAOs) can be held legally accountable for their actions.
A federal judge ruled in favor of the CFTC after Ooki DAO neglected to address an enforcement action brought by the commodities regulator. The judgment establishes a precedent that other DAOs may also face liability for legal infractions as a "person" under the Commodity Exchange Act. The court concluded that Ooki DAO violated the law as charged. This decision paves the way for potential future actions against DAOs and decentralized exchanges.
CFTC Division of Enforcement Director Ian McGinley remarked, "The creators of Ooki DAO intentionally designed the organization to evade legal responsibilities and operated an illicit trading platform without accountability." He added, "This ruling serves as a wake-up call to those who believe they can evade the law by adopting a DAO structure, putting the public at risk."
Several amicus briefs filed on behalf of Ooki DAO argued against treating DAOs as a unified entity. These briefs contended that the government should be required to individually identify and summon each member of the DAO before proceeding with the case.
Last September, the CFTC initiated an enforcement action against the decentralized trading platform to halt Ooki's unregistered retail commodity trading of digital tokens. Despite multiple electronic summonses, Ooki DAO did not respond in court. Consequently, the court found Ooki DAO civilly liable for operating an illegal trading platform and unlawfully acting as a futures commission merchant.
In light of the default judgment, Ooki DAO has been instructed to cease conducting business in the United States and is prohibited from engaging with any entity registered with the CFTC, including non-U.S. companies. The court order also mandates that Ooki DAO and any person or entity providing web-hosting or domain-name registration services within the U.S. for Ooki DAO's website, domain name, or affiliated URLs must take down the website, preserve documents, and inform the CFTC of any additional websites controlled by or on behalf of Ooki DAO. Additionally, Ooki DAO is liable to pay a civil penalty exceeding $640,000.
