Uniswap Proposal to Give DAO Legal Certainty, Says Foundation's Counsel

By André Beganski

The Uniswap Foundation published a proposal on Monday to establish a new legal entity in Wyoming for Uniswap Governance, the decentralized exchange’s governing body of members, delegates, and token holders.

Under the proposal, Uniswap Governance would become structured as a Wyoming Decentralized Unincorporated Nonprofit Association (DUNA), allowing the group to operate with greater legal certainty, according to Uniswap Foundation General Counsel Brian Nistler.

“Uniswap Governance [has] never had a legal organization,” Nistler told Decrypt. “By adopting the DUNA, Uniswap Governance would be electing a particular structure that would be in the U.S., within Wyoming, that protects participation in all of the decision-making activities.”

If Uniswap Governance agrees on becoming a DUNA, that would lay the groundwork for new things like treasury management and the ability to hire accountants and lawyers “without ascribing the individual liability for its members,” Nistler said.

With greater legal certainty, Uniswap Governance may also revisit a so-called fee switch. The group has weighed several proposals that would allow Uniswap (UNI) token holders to receive a portion of the DEX’s trading fees, but they have been stymied in recent years, largely due to concerns that the move could be in violation of U.S. securities laws.

Uniswap has generated $122 million in fees over the past 30 days, with $6 billion in digital assets currently being used within the DEX, according to crypto data provider DefiLlama.

Uniswap Governance is a Decentralized Autonomous Organization, or DAO. It operates without a central authority, replacing traditional hierarchical management with a community-based structure, where UNI token holders are able to periodically vote on initiatives with their holdings.

Nistler acknowledged that Wyoming’s DUNA framework is “novel and nuanced,” and while Uniswap Governance wouldn’t be the first group to adopt it, “we would definitely be the largest, which we believe is precedent setting,” he said.

The Uniswap Foundation is U.S.-registered nonprofit itself, which is funded by Uniswap Governance but acts independently from the group, as well as Uniswap Labs, the company that initially developed Uniswap for the Ethereum blockchain.

Wyoming’s DUNA law was enacted last year, providing member-controlled organizations to gain legal recognition while preserving decentralization, according to crypto payroll and tax compliance firm Toku.

“It gives DAOs legal standing, allowing them to contract, own assets, sue and be sued, and pay taxes,” it said in March. “Without a legal structure, DAOs are often considered general partnerships, making every token holder potentially liable for lawsuits.”

In a sprawling report released by the White House on the cryptocurrency industry last month, the government recognized Wyoming as one of the few states with laws on the books for DAOS. Colorado has a framework for operating DAOs as Limited Cooperative Associations, such as SporkDAO, which hosts an annual Ethereum conference in Denver.

Under some legal frameworks, DAOs have had to sacrifice decentralization in the past, but there will be a minimal change to Uniswap Governance on-chain, Nistler said.

“You are able to point to the smart contracts and governance procedures that you have that are already in place,” he said. “We'll still be able to do forum posts and proposals, engage in discussion, and do snapshot votes—so ultimately, have an on-chain vote.”

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