CFTC Allowed to Serve Ooki DAO Members Through Chat Box

CFTC Allowed to Serve Ooki DAO Members Through Chat Box

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http://fullycrypto.com/

By Mark Hunter

10 hours agoWed Oct 05 2022 09:37:38

CFTC-Allowed-to-Serve-Ooki-DAO-Members-Through-Chat-Box

Reading Time: 2 minutes

  • The CFTC can serve members of a DAO through the project’s chat box and forum
  • A judge ruled on Monday that the method was an appropriate one in the circumstances
  • The move will have ramifications for how DAOs are treated in a legal sense

The United States Commodities Futures Trading Commission (CFTC) has been told it can serve members of the Ooki decentralised autonomous organisation (DAO) with a summons through online communications, such as a chat box or forum. A ruling on this matter came on Monday from a federal judge and sets a potentially concerning precedent that has already attracted criticism from CFTC commissioners themselves.

Two DAOs Being Targeted

The issue at heart concerns a lawsuit against the Ooki DAO on September 22nd by the CFTC, which alleges that the DAO offered “illegal, off-exchange digital asset trading,” violated registration guidelines and broke provisions of the Bank Secrecy Act. Similar legal action was taken against Bzerox and its founders, who were ordered to pay $250,000 as part of a civil monetary penalty.

Given that DAOs are made up of anonymous or pseudonymous individuals, going after them on a legal front is therefore very challenging, which is why the CFTC asked for permission to serve them through digital communications. In Monday’s ruling, U.S. District Judge Orrick granted the motion, saying that the commission could provide a copy of its summons and complaint through the Ooki DAO help chat box as well as issuing a notice on its online forum.

The decision could set a precedent that completely undermines the privacy rights theoretically granted to DAOs by their decentralised setup, something that one CFTC member, Summer Mersinger, dissented against at the time of the lawsuit when the CFTC was discussing how to serve Ooki DAO and Bzerox:

Unfortunately, I cannot support the Commission’s approach to this particular matter. While I do not condone individuals or entities blatantly violating the CEA or our rules, we cannot arbitrarily decide who is accountable for those violations based on an unsupported legal theory amounting to regulation by enforcement while federal and state policy is developing.

DAO Voting Mechanism to Decide on Legal Path

The matter also throws up an interesting use of the DAO governance model, with Ooki DAO members debating how to move forward with the case. Various options have been thrown up by the members, suggesting it allocate funds from the treasury to hire lawyers for affected members, attempt to elicit support from the DeFi community and raise legal funds by selling NFTs.

It is expected that the DAO will use its governance model to vote on the final decision, which, of course, could result in hugely disproportionate impacts for those directly affected.

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