In a landmark ruling, a US district judge has favored the US Commodity Futures Trading Commission (CFTC) in its litigation against Ooki DAO for running an illegal trading platform and failing to comply with the Bank Secrecy Act. The CFTC charged Ooki DAO in late 2022 with operating an illegal trading platform, registration violations and for failing to comply with the Bank Secrecy Act, such as know-your-customer requirements. As per Judge William H. Orrick’s default judgment order, Ooki DAO has been asked to stop operating in the US and shut down its website, along with paying a civil penalty of $643,542.

Implications for the Decentralized Autonomous Organizations (DAOs)

The ruling could set a precedent for other decentralized autonomous organizations (DAOs) that operate on blockchain and execute through smart contracts. The CFTC’s enforcement action against Ooki DAO last year was the first of its kind, according to a September post from law firm K&L Gates. The case has highlighted that the CFTC will investigate the “nature of the digital asset transactions facilitated by the DAO, rather than the form of the DAO itself.”

CFTC’s Response

The CFTC has called the decision a “precedent-setting decision” since the court held that Ooki DAO is “a person” and can be held liable when violating the law. Ian McGinley, the CFTC’s director of the enforcement division, stated that “This decision should serve as a wake-up call to anyone who believes they can circumvent the law by adopting a DAO structure, intending to insulate themselves from law enforcement and ultimately putting the public at risk.”

Other DAOs in the US

In March of this year, Sushi DAO, an organization behind a decentralized crypto exchange, revealed that it had been issued a subpoena by the US Securities and Exchange Commission. The SEC had subpoenaed the project, according to Bloomberg Law. This news indicates that the regulatory scrutiny of DAOs is increasing in the US.

The ruling in favor of the CFTC against Ooki DAO has far-reaching implications for DAOs that operate on blockchain and execute through smart contracts. The ruling sets an important precedent for regulatory actions against illegal trading platforms and other illegal activities conducted by DAOs. The news also indicates that US regulators are increasingly scrutinizing the activities of DAOs.


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