In his decision on November 18, Judge Vince Chhabria of the U.S. District Court for the Northern District of California stated that Lido DAO could be considered a partnership under California general partnership laws. With this decision, it may become difficult for DAO members to avoid responsibilities arising from the activities of the organization.

The case stems from a complaint filed by an investor named Andrew Samuels, who purchased tokens issued by Lido DAO, in order to compensate for the losses he suffered.

Samuels claimed that Lido DAO’s tokens were unregistered securities and argued that the organization should register these assets with the US Securities and Exchange Commission (SEC).

The court found that Samuels had sufficiently alleged that Lido DAO and its identifiable partners could not avoid liability. Judge Chhabria stated that Lido DAO could qualify as a general partnership under California law and that members of that partnership could be held liable for the actions of the organization.

Samuels described Lido DAO’s four major institutional investors — Paradigm Operations, Andreessen Horowitz, Dragonfly Digital Management and Robot Ventures — as partners in the organization and suggested that these organizations should bear responsibility.

However, only Robot Ventures was exempted from liability during the litigation process. The judge stated that the other three investors could be considered general partners due to their participation in the management and operations of Lido DAO.

During the litigation process, four major investors submitted a petition to dismiss the case. However, only Robot Ventures’ petition was accepted. The following statements were included in the court documents:

“The motion to dismiss filed by Robot Ventures was granted because Samuels failed to adequately allege that Robot Ventures was a member of the Lido general partnership. All other petitions were denied.”

This decision could have significant consequences for decentralized organizations. Miles Jennings, A16z Crypto’s general counsel and decentralization lead, called this decision a major blow to decentralized governance.

According to Jennings, in line with this decision, even a simple post by a DAO member in the forums may be enough to hold other members responsible for their actions.

Jennings argued that the decision goes against the nature of decentralized governance structures and threatens the fundamental principles of DAOs. He also stated that this situation could expose individual DAO members to legal risks.

This case reignited debate about the legal status of DAOs and the responsibilities of their members. The decision raised further questions about how DAO structures would comply with state and federal laws.

Members of decentralized organizations may have to take a more careful approach to reduce their risk of legal liability. This development could have a significant impact on the future of decentralized finance (DeFi) and blockchain-based projects.