DAOs for Collective Investment

Abstract

Abstract Decentralized autonomous organizations (DAOs) use blockchain-based smart contracts to pool capital and execute votes without intermediaries, dramatically lowering costs and widening access to early-stage investment. Unlike traditional venture capital or even regulated crowdfunding portals, anyone with a compatible wallet can buy governance tokens, propose projects, and share upside—creating a global, retail-friendly investor commons that may surface ideas conventional funds ignore. Yet that very openness runs head-long into legal gray zones: Are DAO tokens unregistered securities? Who is liable when code malfunctions or a majority votes to break a rule? Lacking the corporate personhood, disclosure duties, and Know Your Customer checks that anchor crowdfunding platforms, DAOs drift between patchwork state LLC statutes and sporadic enforcement actions. Clear statutory definitions, retrofit governance standards, and tailored investor protection rules are now essential if policymakers hope to harness DAOs’ democratizing promise while containing systemic, consumer, and cyber-fraud risks.