“The decision in Samuels v. Lido DAO did not rule that token holders are personally liable for a protocol's debts, as much of the early commentary claimed. It held that the plaintiff plausibly alleged that Lido DAO operates as an unincorporated general partnership, and that the protocol's most active institutional backers could be on the hook as partners. That is a pleading-stage ruling, not a final judgment.”
In November 2024, a federal judge in San Francisco let a lawsuit proceed that should change how every DAO founder thinks about personal risk. The decision in Samuels v. Lido DAO did not, as much of the early commentary claimed, “rule” that token holders are personally liable for a protocol’s debts. It did something narrower—and, for builders, almost as important. It held that the plaintiff had plausibly alleged that Lido DAO operates as an unincorporated general partnership, and that the protocol’s most active institutional backers could be on the hook as partners. That is a pleading-stage ruling, not a final judgment. But it is the clearest signal yet that “decentralization” is not, by itself, a liability shield—and that the way to obtain one is a recognized legal entity. This article explains what the court actually held, who is exposed and who is not, why the theory is not yet settled law, and the legal wrapper options that put a limited-liability structure around an on-chain organization.
Key Takeaways
- The ruling was about pleading, not proof. A motion to dismiss tests only whether a complaint states a plausible claim. The court held that the plaintiff “adequately allege[d]” a general partnership and could proceed—it expressly left “the exact contours” for “a full evidentiary record at summary judgment or trial.”1
- Active participation, not token ownership, drove the result. The court let the claim proceed against backers alleged to have actively governed the protocol, but dismissed one investor whose involvement was alleged to be mere token ownership, and stated that every LDO holder “hasn’t automatically joined the partnership.”1
- The applied statute is the California Corporations Code, not a generic “Uniform Partnership Act.” California partnership law (modeled on RUPA) supplied the rule that a general partnership forms by conduct and that partners face joint-and-several liability.2
- A legal wrapper is the fix. Wyoming’s DAO LLC and its newer DUNA statute, comparable laws in Vermont, Tennessee, and Utah, and offshore options like a Swiss foundation or a Marshall Islands DAO LLC all supply the limited liability an unincorporated DAO lacks.345
- It is not settled law. The court declined to certify the ruling for appeal, discovery is ongoing, and summary-judgment briefing runs into late 2026. Samuels is a viable theory that survived a first test—not a final holding that DAOs are partnerships.1
What Samuels v. Lido DAO Actually Held
The case began the way many crypto disputes do: an investor, Andrew Samuels, bought LDO governance tokens, lost money, and sued. His theory was not primarily a securities theory, though a federal securities claim is in the case. It was an old one. Samuels argued that Lido DAO is an unincorporated general partnership, that its active participants are general partners, and that general partners are personally liable for the venture’s obligations.
On November 18, 2024, Judge Vince Chhabria of the Northern District of California ruled on the defendants’ motions to dismiss.1 A motion to dismiss is a narrow procedural test. The court does not weigh evidence or decide who wins; it asks only whether, taking the complaint’s allegations as true, the plaintiff has stated a plausible claim. That distinction is the whole story here, and it is the distinction the early headlines erased.
The court held that Samuels had cleared that bar. In its words, “at the pleading stage, it is enough for Samuels to adequately allege that some general partnership exists,” and he had pleaded “sufficient facts to allow the reasonable inference that a Lido DAO general partnership was formed.”1 Crucially, the court then declined to go further: the “exact contours” of any partnership, it said, are “better determined on a full evidentiary record at summary judgment or trial.”1
Read precisely, the ruling says the partnership theory is plausible enough to litigate—not that it is true. That is a meaningful difference for any DAO assessing its own exposure. The theory is live, well-pleaded, and being tested. It has not been proven.
Who Is a Partner—and Who Is Not
The most useful part of the opinion is the line it draws between defendants. Samuels did not just sue Lido DAO; he sued four of its institutional backers as alleged partners: Paradigm, Andreessen Horowitz (a16z), Dragonfly Digital Management, and Robot Ventures. The court did not treat them identically.
It allowed the claim to proceed against Paradigm and a16z, which it described as easily alleged partners given their active governance roles, and against Dragonfly, which it called a closer call but sufficient at the pleading stage. It dismissed Robot Ventures. The court found that Samuels had not adequately alleged that Robot Ventures did anything beyond purchase tokens, and mere token ownership, without participation in governance, was not enough to make it a partner.1
That dismissal is the single most practically important holding in the opinion, and the original commentary on this case—including an earlier version of this very article—routinely omitted it. The court was explicit that “every LDO holder … hasn’t automatically joined the partnership.”1 The line that mattered was active participation in governance: voting, steering proposals, providing advisory support, promoting the protocol. Passive ownership sat on the safe side of that line.
For DAO participants, the lesson is not “owning a token makes you liable.” It is “actively running the venture without a liability shield can make you a partner.” That reframing changes the risk calculus—and points directly at the fix.
A second correction worth making: this case is about the operator of a particular Lido deployment, not about an abstract, protocol-wide pool of value. The court expressly rejected the framing that the suit targets the entire protocol, noting that Samuels “is not suing that protocol—he is suing the entity that operates the particular Lido deployment.”1 Sweeping figures about a protocol’s total value locked are not what is on the line in this case, and a careful analysis should not pretend otherwise.
Partnership Law’s Default Rule
The reason this theory has teeth is that partnership is the default business form. Most DAO founders assume limited liability is the baseline. It is the opposite.
Because the defendants are sued in their capacity to be partners, the court applied the partnership law of the forum—here, California’s Corporations Code, which codifies that state’s enactment of the Revised Uniform Partnership Act (RUPA).2 Two provisions do the work. Section 16202(a) provides that “the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.”2 Section 16306(a) makes partners jointly and severally liable for the partnership’s obligations.2 No paperwork, no signed agreement, and no subjective intent to form a partnership is required. Conduct controls.
A word on terminology, because the distinction matters for accuracy. The model statute is RUPA (1997); the broadly cited “49 states adopted the Uniform Partnership Act” figure refers to the older UPA (1914), and RUPA has been adopted by a smaller set of jurisdictions.6 What governed Samuels was neither model act in the abstract but California’s own codification of RUPA. The practical rule is the same in most states: act like a partnership, and the law may treat you as one.
What joint-and-several liability means in practice:
- Personal assets are exposed. A general partner’s individual property can answer for the venture’s debts.
- Any one partner can be pursued for the whole. Joint-and-several liability lets a creditor collect a full obligation from a single partner, who must then seek contribution from the others.
- Exposure can outlast your tokens. Liability for obligations incurred while you were a partner does not necessarily evaporate when you sell.
- Pass-through tax consequences can follow. Partnership classification carries its own tax treatment, independent of the liability question.
This is also why the institutional defendants’ upstream fund structures did not end the inquiry. Holding a stake through a Delaware LP or an offshore fund does not, by itself, prevent the people and entities actively governing a DAO from being treated as partners in that DAO. The shield has to sit at the level of the DAO, not just upstream of the investor.
Why This Is Not Settled Law—Yet
It would be a mistake to read Samuels as the final word. Several things keep it provisional:
- It is a pleading-stage ruling. The court decided only that the claims may proceed, not that they prevail.1
- No appellate review yet. The court declined to certify the order for interlocutory appeal, so there will be no appellate ruling on the theory until final judgment.1
- The case is in active discovery. Under the operative schedule, summary-judgment motions are due in the second half of 2026, with a dispositive-motion hearing set before Judge Chhabria later that year. The merits of the partnership theory have not been adjudicated.1
- It is one of two pleading-stage rulings, not a settled rule. Sarcuni v. bZx DAO in the Southern District of California is the companion authority frequently paired with Lido; together they show courts are willing to entertain DAO general-partnership theories at the pleading stage, not that the theory has been proven at trial.7
The honest framing is this: a serious, well-pleaded general-partnership theory against a major DAO has survived its first legal test, twice in two districts. That is reason enough to act. It is not the same as a court holding, after trial, that DAO participants are partners. A law firm that tells you otherwise is overselling the state of the law.
The takeaway is not panic; it is structure. The theory is viable enough that operating an active DAO without a liability wrapper is an unforced error.
The Legal Wrapper Options
The good news is that the entity law has caught up. Several jurisdictions now offer structures designed for on-chain organizations, each supplying the limited liability an unincorporated DAO lacks while preserving decentralized governance to varying degrees.
Wyoming DAO LLC
Wyoming pioneered DAO-specific entity law in 2021 with its Decentralized Autonomous Organization Supplement, which created the DAO LLC as a recognized limited-liability entity.3 Members obtain LLC liability protection; governance can be member-managed or algorithmically managed, on-chain or hybrid. A DAO LLC files articles of organization identifying itself as a DAO, adopts an operating agreement defining its governance, and maintains a Wyoming registered agent.
Wyoming DUNA (Decentralized Unincorporated Nonprofit Association)
In 2024, Wyoming added a second, and for many DAOs better-fitting, option: the Decentralized Unincorporated Nonprofit Association Act, effective July 1, 2024.4 A DUNA gives an unincorporated, nonprofit-style DAO—the common shape of a protocol or public-goods community—legal personhood and limited liability for its members without forcing it into an LLC mold. It is designed for membership organizations that take in fees or token value but are not structured to distribute profit to owners, and it has quickly become a leading wrapper for governance-token DAOs that do not fit the for-profit LLC template. Any DAO weighing a Wyoming structure should evaluate the DUNA alongside the DAO LLC.
The Broader U.S. Landscape: Four States
Despite frequent claims that a dozen or more states have “DAO laws,” the set of states with DAO-specific or blockchain-entity statutes is small and identifiable: Wyoming (DAO LLC, 2021; DUNA, 2024), Vermont (Blockchain-Based LLC, 2018), Tennessee (Decentralized Organization / DAO LLC, 2022), and Utah (Limited Liability Decentralized Autonomous Organization, effective 2024).5 Other states offer ordinary LLC and nonprofit forms that a DAO can use, but the purpose-built statutes are these four. Precision matters here: overstating the number of available frameworks is exactly the kind of claim that misleads founders about their options.
Foundation + Association Model (Switzerland / Liechtenstein)
European and internationally focused DAOs have long used a Swiss foundation (or a foundation-and-association pairing), in which a foundation holds protocol assets and intellectual property and a member association handles governance. The structure offers strong limited liability and regulatory credibility, at meaningfully higher formation and ongoing-compliance cost than a U.S. DAO entity, and with more centralization at the foundation-board level. It fits public-goods protocols and nonprofit-style projects.
Marshall Islands DAO LLC
The Marshall Islands recognized DAOs in 2022—first through a Non-Profit Entities Act amendment and then a standalone DAO statute—creating a flexible offshore DAO LLC with limited liability, no physical-presence requirement, and light reporting.8 It appeals to internationally distributed, privacy-minded DAOs, with the usual offshore trade-offs: less-developed precedent, potential regulatory and banking friction, and a thinner body of guidance.
Hybrid Framework (Legal Wrapper + On-Chain Governance)
The emerging best practice is a hybrid: a legal entity—an LLC, DUNA, or foundation—owns the protocol’s contracts and treasury and serves as the liability shield, while governance stays fully on-chain. The entity functions as a “dumb executor” of community votes, with managers or directors charged to implement decisions the token holders make. This preserves decentralization while putting a recognized limited-liability layer between participants and the venture’s obligations—precisely the gap Samuels exposed.
Choosing a Structure
There is no single right answer; the fit depends on where participants are, what the protocol is for, and how much compliance the project can carry.
| Factor | Wyoming DAO LLC / DUNA | Swiss Foundation | Marshall Islands | Hybrid Model |
|---|---|---|---|---|
| Relative formation cost | Lower | Highest | Low-moderate | Moderate |
| Annual compliance | Low-medium | High | Very low | Medium |
| Liability protection | Strong | Very strong | Moderate | Strong |
| Decentralization fit | High | Medium | High | Very high |
| International reach | U.S. focus | Excellent | Excellent | Flexible |
| Regulatory clarity | Good and improving | Excellent | Developing | Good |
Rules of thumb:
- U.S.-centered participants point toward a Wyoming DAO LLC or DUNA.
- Public-goods or nonprofit protocols point toward a DUNA or a Swiss foundation.
- Internationally distributed, lower-compliance projects point toward the Marshall Islands.
- Maximum on-chain decentralization points toward a hybrid wrapper.
The cost figures vary widely by jurisdiction and counsel, and any specific quote should come from the professionals doing the formation rather than a published range. What does not vary is the comparison that matters: the cost of any of these structures is small next to the personal exposure that Samuels shows an unwrapped DAO can face.
Retrofitting an Existing DAO
Most DAOs launched without a legal structure. The fix is available retroactively, and it is worth doing deliberately rather than fast-and-sloppy. The work typically runs in four stages: form the entity in the chosen jurisdiction; transfer protocol IP and treasury into entity-controlled custody; integrate on-chain governance into the entity’s operating documents so the entity executes token-holder votes; and obtain community approval through the DAO’s own governance process. Done properly, the migration takes a few months and requires counsel experienced specifically in DAO formations—cookie-cutter LLC paperwork will not bridge on-chain governance to corporate formalities.
The structure does not centralize the DAO; it protects the people in it. The entity is a shield, not a boss.
The Bottom Line
Samuels v. Lido DAO is not the cataclysm some headlines made it, and it is not nothing. It is a federal court holding that a general-partnership theory against a major DAO is plausible enough to litigate, that active governance participants can be alleged partners, and—importantly—that passive token ownership alone is not enough. The theory is live, it is being tested in two districts, and it has not yet been decided on the merits.
The rational response is structural. “Decentralization” is an operating characteristic, not a legal status, and only a recognized entity supplies limited liability. The wrappers exist, they are well-developed, and they preserve on-chain governance. The real question for any active DAO is not whether the partnership theory will ultimately win at trial—it is whether you want to be the defendant who finds out.
Need DAO Legal Structure Guidance?
Astraea Counsel helps DAOs implement legal wrappers, governance structures, and liability protection. Explore our Digital Assets & Blockchain legal services.
Related Resources
- DeFi Protocol Legal Structure: LLC, Foundation, or DAO?—Comprehensive entity comparison guide
- DAO LLC Formation Guide: Wyoming DUNA Setup—Step-by-step formation process
- Treasury Management for Crypto Companies—Asset custody and segregation requirements for DAOs
- Corporate & Transactions Practice—Entity formation and governance structures
- Contact Us—Discuss your DAO’s legal structure
- Cryptocurrency Lawyer in California—engaging counsel on licensing, token launches, custody, and enforcement
Footnotes
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Order Re Motions to Dismiss, Samuels v. Lido DAO, No. 3:23-cv-06492-VC (N.D. Cal. Nov. 18, 2024) (Chhabria, J.) (Dkt. 115). The order holds that “at the pleading stage, it is enough for Samuels to adequately allege that some general partnership exists” and that he pleaded “sufficient facts to allow the reasonable inference that a Lido DAO general partnership was formed,” while reserving the “exact contours” for “a full evidentiary record at summary judgment or trial”; it grants the motion to dismiss as to Robot Ventures (mere token ownership inadequately alleged participation), denies the other investor defendants’ motions, observes that “every LDO holder … hasn’t automatically joined the partnership,” and frames the suit as against the operator of “the particular Lido deployment” rather than the protocol at large. The court later declined to certify the order for interlocutory appeal; the case remains in pre-trial discovery with dispositive-motion practice scheduled into late 2026. PDF ↩ ↩2 ↩3 ↩4 ↩5 ↩6 ↩7 ↩8 ↩9 ↩10 ↩11 ↩12
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Cal. Corp. Code § 16202(a) (a partnership forms from “the association of two or more persons to carry on as co-owners a business for profit … whether or not the persons intend to form a partnership”) and § 16306(a) (joint-and-several liability of partners for partnership obligations); California’s partnership law is its enactment of the Revised Uniform Partnership Act, and Samuels applied forum partnership law under Fed. R. Civ. P. 17(b). PDF ↩ ↩2 ↩3 ↩4
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Wyo. Stat. Ann. § 17-31-101 et seq. (Decentralized Autonomous Organization Supplement; SF0038, effective July 1, 2021), available at https://sos.wyo.gov/Forms/WyoBiz/DAO_Supplement.pdf. PDF ↩ ↩2
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Wyo. Stat. Ann. § 17-32-101 et seq. (Decentralized Unincorporated Nonprofit Association Act; SF0050, effective July 1, 2024), available at https://www.wyoleg.gov/2024/Introduced/SF0050.pdf. PDF ↩ ↩2
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States with DAO-specific or blockchain-entity statutes: Wyoming (Wyo. Stat. § 17-31-101 et seq., DAO LLC, 2021; Wyo. Stat. § 17-32-101 et seq., DUNA, 2024); Vermont (11 V.S.A. § 4171 et seq., Blockchain-Based LLC, 2018); Tennessee (Tenn. Code § 48-250-101 et seq., Decentralized Organization, 2022); Utah (Utah Code § 48-5-101 et seq., Limited Liability Decentralized Autonomous Organization, effective 2024). PDF PDF PDF ↩ ↩2
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The Revised Uniform Partnership Act (1997) is the model statute California codified; the often-cited “49 states” figure refers to the earlier Uniform Partnership Act (1914), which Louisiana did not adopt, while RUPA (1997) has been adopted in a smaller set of jurisdictions. Uniform Law Commission, Partnership Act (1997) (Last Amended 2013), https://www.uniformlaws.org/committees/community-home?CommunityKey=52456941-7883-47a5-91b6-d2f086d0bb44. ↩
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Sarcuni v. bZx DAO, 664 F. Supp. 3d 1100 (S.D. Cal. 2023) (order on motion to dismiss addressing general-partnership liability of DAO members), the companion pleading-stage authority frequently paired with Samuels. PDF ↩
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Republic of the Marshall Islands DAO recognition: the February 2022 Non-Profit Entities (Amendment) Act and the subsequent Decentralized Autonomous Organization Act 2022 (52 MIRC Ch. 7), creating the Marshall Islands DAO LLC, https://rmiparliament.org/cms/images/LEGISLATION/PRINCIPAL/2022/2022-0050/2022-0050_2.pdf. ↩
