“Fear” may prevent Ooki DAO from defending itself against the CFTC
Ooki DAO, the first so-called decentralized autonomous organization (DAO) to be taken to court for alleged infringement in the US, is struggling to get answers to the Commodity Futures Trading Commission (CFTC) with just days left before it risks automatically losing its case .
Fears that simply expressing their views could fuel a further legal crackdown could prevent community members from voting to fund their own legal defense, community members and an observer told CoinDesk. The result: a decentralized crypto governance group whose members are confident in defending themselves using the tools of crypto governance.
The Investor Collective members (Ooki DAO token holders) are accused of illegally operating the Ooki Protocol as an unregistered leveraged crypto exchange that does not collect customer data. Ooki is the decentralized successor to bZeroX, LLC, a similarly centralized exchange whose founders have already settled their corresponding charges with the CFTC.
The CFTC is now seeking to hold Ooki’s decentralized management — its DAO token holders — accountable for the platform’s alleged wrongdoing. In late September, it filed a complaint against owners of Ooki tokens who have participated in the governance of the Ooki protocol by using their tokens to vote in the DAO.
According to the fluid philosophies of decentralized crypto governance, such a lawsuit should not be possible. When bZeroX’s founders gave Ooki DAO control of their platform in August 2021, they believed that community governance would “future-proof” the protocol from regulators, who wouldn’t know who to sue. The CFTC disagreed and sued the entire community.
Read more: CFTC’s Ooki DAO Action shatters the illusion of regulator-proof protocol
Guilt by participation may help explain why Ooki’s latest governance issue on the “Future of Ooki DAO” has gained zero traction. On Monday, a proposal to create a legal defense fund and block US users from Ooki failed with zero votes either for or against.
“Probably people are afraid to vote at the moment,” said a member of the Ooki DAO community who goes by “Frank” on Telegram. “We will continue with an onchain proposal and see how it goes.”
Their fears may be well-founded. According to attorney Nelson Rosario, who runs a crypto law practice, token holders may fear that by voting on Ooki DAO’s response to legal threats, they may become embroiled in them.
Once again the poll received three “yes” responses by press time. If that procedural measure passes, the Ooki DAO will hold a binding vote on the chain, Frank said.
If passed, the proposal promises to use the Ooki DAO’s treasury for legal fees for “all DAO members named in a complaint,” pursue a crowdfunded legal defense fund to protect other DAOs that catch the ire of regulators, and allocate the treasury to the continued operation of DAO.
If this process is meant to produce a formal response to the CFTC, the DAO is short on time: The court’s deadline is by Friday.
Data website Nansen indicates that Ooki DAO has over $3 million in cash on hand, much of it in native tokens.
“I can assure you that the Ooki DAO contributors will continue to develop our protocol as we have enough funds available,” said Frank.
Read more: Interpretation of the CFTC’s lawsuit against Ooki DAO
