Concept
A DAO is a decentralized autonomous organization governed by its token holders under rules written into smart contracts. For a long time it was a legal nobody: with no recognized status, a DAO could not sign contracts, open accounts, pay tax in its own name, or shield its members from personal liability. Wyoming was the first U.S. state to try to close that gap, and it gave DAOs two distinct legal wrappers.
What a DAO Risks Without a Wrapper
Without a wrapper of its own, a DAO is by default at risk of being treated as a general partnership — a form in which each participant answers for the group's common obligations with their own personal assets. This is not a hypothetical threat: the court in the Ooki DAO case (the CFTC suit) treated the organization as exactly such a partnership, and class actions built on the same logic have been filed against Compound, Lido, and others. For a token holder, that status means unlimited liability and an unpredictable tax position.
A legal wrapper closes these gaps at once: it gives the organization legal personality — the right to sign contracts, open accounts, and appear in court — introduces limited liability for its members, lets it pay tax legally, and spares it from piecemeal beneficial-ownership disclosure to the state. In essence it is the same set of conveniences for which an ordinary business uses an LLC or a corporation.
DAO LLC (2021)
In 2021 Wyoming passed SF0038, a supplement to its LLC Act (codified as W.S. 17-31-101…116) that let a DAO register as a special kind of limited liability company. Such a company gets the ordinary limited liability of any LLC, and its articles may point directly to a smart contract as the source of governance rules. The 2022 amendments (SF0068, effective 9 March 2022) sharpened the key definitions — "membership interest", "smart contract", and the degree to which a DAO is member managed or algorithmically managed. This made the state a pioneer of DAO regulation, but the construct has a limit: folding a genuinely distributed network of thousands of token holders into a single LLC does not always work.
DUNA (2024)
On 7 March 2024 the governor signed SF0050, the Decentralized Unincorporated Nonprofit Association Act, which took effect on 1 July 2024. The law builds on the state's earlier Unincorporated Nonprofit Association Act (in effect a "digital UNA") and drew on a model act prepared by lawyers at a16z crypto. A DUNA gives a DAO the status of a decentralized unincorporated nonprofit association: to qualify, the organization must have at least 100 members sharing a common purpose. If the count falls below one hundred, the DUNA automatically converts into an ordinary, non-decentralized UNA. Revenue-generating activity is allowed — provided the profit serves the association's purpose rather than being split among members — and for tax the DUNA may elect to be treated as a corporation and pay at its own level.
Taxes and Securities
For a DUNA the tax question is resolved through the corporate election: the association pays tax at its own level, without passing it down to members or disclosing them by name. This removes the main headache of wrapper-less DAOs — the unpredictable pass-through taxation of holders scattered around the world. The law leaves room to obtain 501(c) status, but there are no public precedents yet, so applicability to a specific project has to be assessed individually.
On the securities side the construct also tends to help. A DUNA by default has no directors or management, and its members have no duty to maximize profit; this strengthens the argument that the Howey test's "expectation of profit from the efforts of others" is not satisfied. At the same time the law expressly allows reasonable compensation for members, including for taking part in governance, so contributors can be paid without losing the nonprofit status.
How It Works in Practice
The first working DUNAs appeared almost at once: Syndicate Network Collective was organized in the fall of 2024. The landmark case came in September 2025 — the governance of Uniswap, the largest decentralized exchange, voted for the DUNI wrapper built on a Wyoming DUNA, and the DEX gained its own legal entity for the first time. The roles in this model are separated: the Uniswap Foundation acts as a "ministerial agent" that merely executes decisions taken by vote, while a Wyoming administrator (Cowrie) handles reporting, the EIN, and taxes. To settle past tax obligations and fund legal defense, the foundation set aside roughly $16.5 million in UNI tokens.
Beyond Wyoming
Wyoming was first, but not the only state to give DAOs a legal form. Tennessee allowed DAOs to register as LLCs back in 2022, requiring a choice between member management and smart-contract management. Utah went further: HB357 (2023) created a separate type of legal entity for DAOs instead of an adapted LLC. When comparing constructs it helps to keep the familiar tools in mind too — for example a Series LLC in Delaware or classic holding structures.
The DUNA model itself began to spread across the country in 2026: in April, Alabama (signed by Governor Kay Ivey) and West Virginia passed their own DUNA laws, bringing the count to three states. Federal recognition may be cemented by the crypto market structure bill (the CLARITY Act): in May 2026 the Senate Banking Committee approved its version and the bill was placed on the voting calendar, but it has yet to clear both chambers and be signed by the president. Anyone structuring crypto assets for private wealth will also want to check the map of crypto-friendly jurisdictions and how the wrapper fits their personal tax profile.
What to Choose and Where the Limits Are
A DAO LLC is closer to commercial projects with a defined circle of participants; a DUNA is designed for large nonprofit networks — protocols and public blockchains with hundreds of token holders. By 2026 the DUNA had stopped being a single-state curiosity: Alabama and West Virginia replicated its model, and Uniswap wrapped the governance of the largest DEX in it. The federal questions — tax, securities, cross-border recognition — still rest on legal argument, with no ready-made rules. For private capital entering crypto, this is a workable way to give DAO participation a legal form; the construct should be tested against the specific jurisdiction and the owner's tax profile.
This material is analytical in nature and does not constitute individual legal or tax advice.
Frequently asked questions
What is the difference between a DAO LLC and a DUNA?
The DAO LLC (since 2021, the SF0038 supplement to Wyoming's LLC Act) is a commercial wrapper with members and limited liability. The DUNA (SF0050, effective 1 July 2024) is a decentralized unincorporated nonprofit association — suited to protocols that need legal personality without shareholder logic.
Why does a DAO need a legal wrapper at all?
Without one, a DAO risks being treated as a general partnership — with unlimited personal liability for every token holder for the protocol's obligations. A wrapper caps liability and lets the organization sign contracts, hold assets, and pay taxes.
Does the DUNA model work beyond Wyoming?
The model is spreading across the US: in April 2026 Alabama and West Virginia passed their own DUNA laws. The first working DUNAs appeared almost immediately after the act took effect — Syndicate Network Collective was organized in the fall of 2024.
How is a Wyoming DAO LLC taxed?
Like a regular LLC: pass-through by default — profit flows to members according to their residence. For non-US members the key question is whether there is a US trade or business; the wrapper itself creates no tax benefit.