Racing for DAOs: progress and pitfalls in jurisdictional competition

Abstract

This article critically evaluates the regulatory landscape surrounding decentralised autonomous organisations (DAOs) in the context of Web3. Referring to the concepts of ‘race to the bottom', ‘race to the top' and the triviality hypothesis, it analyses the regulatory competition faced by DAOs and the core issues of this purported regulatory race in jurisdictions such as Wyoming and the Marshall Islands, including KYC/AML compliance, profit status and taxation and managerial standards. The article argues that while certain jurisdictions offer minimal regulatory requirements to attract DAOs, this approach poses risks to long-term sustainability, accountability and transparency of DAOs. It suggests specific directions for a ‘race to the top’ which entail comprehensive regulatory structures that balance innovation with essential safeguards. This article concludes with a critical reflection on the reality of no obvious substantial regulatory interest in DAOs and evaluates the implications of this regulatory inertia for the future of decentralised governance organisational structures.