DAOs tend to involve multiple participants and are sometimes set up for investment purposes: for example, for trading in crypto-tokens, or for fundraising or charitable purposes. They may also be involved in software engineering.
According to the Commission, thousands of DAOs exist but few of them are structured using the law of England and Wales. It has been asked by the government to investigate questions about the legal status of DAOs, the liabilities of those who participate in them, and the rules and regulations that apply to them.
Law Commissioner Professor Sarah Green said: ‘DAOs are said to offer multiple benefits to market participants, incentivising cooperation and innovation, levelling playing fields, reducing the scope for human error, lowering costs, and increasing transparency.
‘Yet their legal and regulatory status is unclear.’