- A federal judge ruled that Lido DAO qualifies as a general partnership under California law, rejecting claims that it isn’t a legal entity
- Major crypto investors including Andreessen Horowitz and Paradigm were named as general partners due to their active involvement in governance
- The ruling stems from a class-action lawsuit filed by Andrew Samuels over losses from LDO token purchases
- The court determined that even secondary market token sales could make Lido liable under securities laws
- The decision may set a precedent for how profit-driven DAOs are treated legally, with potential liability extending to active participants
Federal Court Classifies Lido DAO as General Partnership in Landmark Ruling
A California federal court has determined that Lido DAO, which governs the prominent liquid staking protocol, can be treated as a general partnership under state law.
Judge Vince Chhabria’s ruling on Monday rejected Lido’s argument that it lacks status as a legal entity.
The decision came as part of a class-action lawsuit filed in the U.S. Northern District Court of California.
Major Investors Face Potential Liability
The court identified several prominent cryptocurrency investors as general partners, including Andreessen Horowitz, Paradigm Operations, and Dragonfly Digital Management, citing their active participation in Lido’s governance.
Robot Ventures, another investor, was excluded from liability due to insufficient evidence of active involvement.
“[The lawsuit] presents several new and important questions about the ability of people in the crypto world to inoculate themselves from liability by creating novel legal arrangements to profit from exotic financial instruments,” Judge Chhabria stated in the ruling.
Impact on DAO Participation
Miles Jennings, General Counsel at a16z crypto, expressed concern about the ruling’s implications in a statement on X.
“Under the ruling, any DAO participation (even posting in a forum) could be sufficient to hold DAO members liable for the actions of other members under general partnership laws,” Jennings warned.
Case Background and Securities Claims
The lawsuit originated when plaintiff Andrew Samuels purchased LDO tokens through Gemini exchange in April and May 2023.
Samuels filed the lawsuit in December 2023, claiming losses from buying what he alleged were unregistered securities.
The court found that Lido’s structure meets California’s legal definition of a partnership, where two or more persons carry on as co-owners of a profit-seeking business.
The ruling also determined that Lido’s lack of direct token sales did not shield it from liability, as the organization actively solicited secondary market purchases.
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