CFTC Slaps First Lawsuit on DAO Over Rules Violation – crypto.news
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The US Commodity Futures Trading Commission (CFTC) has come out against the Decentralized Autonomous Organization (DAO) and its token holders. In a surprising move, the agency has sued the DAO while agreeing to a settlement with another party over regulatory violations.
The CFTC is suing the DAO
In a rare move reminiscent of the Securities and Exchange Commission (SEC), the CFTC has filed suit against Ooki DAO. The application was filed in the United States District Court for the Northern District of California.
In the official complaint, the agency alleges that Ooki DAO is using its platform to circumvent regulations governing its operations. Additionally, Ooki DAO was the dominant protocol for bZeroX, LLC during the last mentioned hash in 2021.
According to the CFTC statement, bZeroX seeks to transfer control of the bZx protocol to the bZx DAO in order to make the bZx DAO immune from regulatory scrutiny. The commission added that the founders are confident that they have found a loophole that allows them to violate the rules laid down.
As a result, the CFTC announced a $250,000 fine and settlement with bXerox and its founders Tom Bean and Kyle Kistner. In addition, the two individuals developed the bZx protocol, which they intended to use to remain invisible to regulators.
At the same time, the latest development could have a wide impact on how the regulator oversees the DAO ecosystem.
The CFTC reiterated that Ooki DAO is an unregistered entity with administrative token holders. Thus, the company may be sued in lawsuits for violating existing laws governing the operation of the DAO.
In addition, the regulator highlights the decision to rebrand bZx DAO as Ooki DAO as fraudulent.
The contents of the document, according to the CFTC, show that several of the DAO’s users had been living and doing business in the United States before it broke out. Based on this, the agency concluded that the company and its founders have engaged in illegal activities, disregarding existing laws.
CFTC Commissioner opposes regulators’ approach
In another twist of events, CFTC Commissioner Summer Mersinger has expressed disagreement with the agency’s approach to the matter.
The commissioner stated that the CFTC could go after individuals found wanting to violate the law. However, he argues that the CFTC does not have the legal authority to hold DAO token holders accountable.
Mersinger added that the commission should have issued an enforcement order. Enforcement is appropriate and emphasizes the individual’s participation in the violation of the law rather than his status as a mark holder.
Mersinger’s dissenting opinion revealed that the commission’s actions were not based on its legal authority. This means that the agency’s operations are based on a thin line between the law and law enforcement.
In addition, Mersinger revealed that if the founders and the company had been the focus of the case, he might have supported the CFTC’s action.
Recent developments have provided a new perspective on regulatory enforcement in the United States