The court named the decentralized autonomous organization Ooki DAO a “person” under the U.S. Commodity Exchange Act, thereby finding it guilty on all counts brought by the Commodity Futures Trading Commission (CFTC).
The U.S. District Court entered an order of default requiring the decentralized autonomous organization Ooki DAO to be permanently shut down, which is also subject to a civil monetary penalty.
The Commodity Futures Trading Commission sued Ooki DAO in September 2022, accusing the decentralized autonomous organization (DAO) of providing retail margin trading and futures brokerage services without the required registration. U.S. District Judge William H. Orrick issued a default judgment after the defendant failed to respond to the lawsuit within the stated time frame until January 2023.
The court thus ordered that:
- Ooki DAO must cease to exist as a trading platform;
- Internet service providers must shut down the Ooki DAO website, remove its content from the Internet, and notify the court of the existence of other websites that may belong to the DAO;
- Ooki DAO must pay a fine of $643,542.
The CFTC’s lawsuit against Ooki DAO is unique because it was the first time the financial regulator had filed a civil lawsuit against a DAO and its token holders. The court’s decision and Ooki DAO’s guilty plea set a dangerous precedent for the entire decentralized industry, as the court found the DAO to be a responsible person under the U.S. Commodity Exchange Act. Therefore, the court effectively ruled that the DAO could be liable for law violations despite its decentralized nature.
According to Ian McGinley, CFTC Division of Enforcement Director, Ooki DAO Founders Tom Bean and Kyle Kistner intentionally put the trading platform’s management in the hands of the community to avoid potential legal problems. He said the cryptocurrency community mistakenly believes that DAOs and DeFi platforms are immune from regulatory scrutiny due to their decentralized nature. “This decision should serve as a wake-up call to anyone who believes they can circumvent the law by adopting a DAO structure,” McGinley emphasized.
The field of decentralized autonomous organizations is actively growing. In 2022, the number of DAOs increased by more than 750%, and the amount of funds under the management of DAOs reached $25.6 billion in 2023.
