The Commodity Futures Trading Commission (CFTC) has scored a sweeping victory over Decentralized Autonomous Organization (DAO) Ooki. The recent court ruling requires Ooki DAO to cease operations permanently and pay a civil monetary penalty of $643,542. The precedent-setting ruling defines Ooki DAO as a “person” under the Commodity Exchange Act. This decision may have profound implications for Decentralized Finance (DeFi) and DAOs.
The Default Judgment Against Ooki DAO
The CFTC initially filed a lawsuit against Ooki DAO in September 2022, accusing it of unlawfully offering retail margin and leverage trading services. The DAO was charged with operating outside the law as a futures commission merchant.
In the course of events, a default judgment was nearly inevitable after Ooki DAO missed the January deadline to respond to the lawsuit. The official order, pronounced on June 9, confirms the anticipated judgment against Ooki DAO.
In a statement released the same day, the CFTC hailed the judgment as a decisive victory, outlining the full scope of the default judgment.
The Implications of the Ruling
Under the ruling, Ooki DAO is now subject to “permanent trading and registration bans”. Furthermore, the organization has been ordered to dismantle the Ooki DAO website and erase its online presence.
More critically, the precedent-setting decision by the court defined Ooki DAO as a ‘person’ under the Commodity Exchange Act. The court maintained that Ooki DAO was indeed in violation of the law as charged. That means that DAOs can now be held accountable for violations of this Act, a decision that significantly impacts the future of DeFi and DAOs.
A Unique Case with Profound Impact
This case against Ooki DAO stands out as one of the first instances of a government agency taking legal action against a DAO and its token holders. Until now, the popular opinion within the industry suggested that DAOs and DeFi platforms were largely immune from regulatory scrutiny due to their decentralized nature. This recent court decision challenges that belief.
A central point of contention, in this case, was the allegation by the CFTC that Tom Bean and Kyle Kistner, the creators of Ooki DAO’s predecessor bZeroX, had intentionally attempted to transfer ownership of their non-compliant trading platform to the Ooki DAO to evade a potential legal backlash.
The CFTC’s Division of Enforcement director Ian McGinley pointed out that the founders constructed Ooki DAO with evasive intent. Their explicit goal was to run an illegal trading platform without legal responsibility.
In light of this judgment, the crypto industry is now on notice. The ruling has drawn a clear line in the sand, indicating that entities cannot sidestep the law under the guise of a DAO structure. This verdict sets a precedent that could reshape the landscape of DeFi and DAOs, forcing them to operate within the bounds of the law to ensure public safety.
The full CFTC statement is available on their official website.
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