10 January 2024
In a historic move that sets a precedent for decentralized autonomous organizations (DAOs), 1inch DAO, the entity behind the 1inch Network, has voted to secure “legal advisory services” from STORM Partners. Notably, this decision comes amid growing regulatory scrutiny on the crypto and decentralized finance (DeFi) sectors.
1inch DAO Votes To Onboard STORM Partners For Legal Advisory Services
Following voting that ended on January 9–overwhelmingly supported by the 1inch community–holders decided to onboard STORM Partners. This marks a significant step forward in the DAO’s efforts to navigate the complex legal landscape and protect its members.
With STORM Partners on board, 1inch DAO becomes the first autonomous organization in the broader crypto ecosystem to access expert guidance on compliance, governance, and legal defense. Out of this landmark move, the DAO will receive expert legal advice.
As such, they will strive to operate within the confines of applicable laws and regulations in the United States and beyond.
This move is particularly noteworthy given the recent United States Securities and Exchange Commission (SEC) concerns over the crypto industry and the DeFi sector. From lawsuits, the agency noted that individuals who engage in illegal activities, including offering unregistered securities, via a DAO could be sued individually.
To illustrate, following a lawsuit from the SEC, BarnBridge DAO agreed to stop selling what the agency said were “unregistered securities.” As part of the settlement, the DAO and its two founders, Tyler Ward and Troy Murray, agreed to pay $1.7 million in damages.
Lawsuits Have Devastated DAOs In The Past
By onboarding legal counsel, 1inch DAO proactively addresses these concerns. It also aims to protect community members against the bruises of the law.
The DAO said the decision was a “deliberate effort to balance preserving decentralization and addressing operational challenges.” Through STORM Partners, the DAO will have a framework and receive legal support, laying a path for others to follow.
This decision considers the adverse impact of a lawsuit from a government agency like the SEC. In June 2023, US District Judge William H. Orrick ruled in favor of the US Commodity Futures Trading Commission (CFTC), agreeing that Ooki DAO issued unregistered commodities.
In a statement, the 1inchDAO new legal partner, STORM, stated the following, hinting at the services and the way they will attempt to protect the entity:
Our team will cover, among others, cross-jurisdiction regulatory compliance, contractual agreements, DAO governance framework, members’ liability, legal personality, asset protection, intellectual property, enforcement of rights and defence against external claims. Our legal representation, underpinned by community-guided Power of Attorney, is meant to ensure the DAO’s stability, efficiency and longevity.
Furthermore, by onboarding a legal advisor, the community aims to protect the DAO’s decentralization while maintaining “regulatory compliance.” It remains to be seen if other DAOs will follow suit and vote to elect a legal representative for their communities.