This guide was built to help you understand the benefits of incorporating your DAO and how the process of DAO incorporation works. We help you answer questions like:
Why should I incorporate my DAO? In what geographic jurisdiction should I incorporate my DAO? What legal entity type should I choose?
Get all the information you need to make the best decisions for you DAO by reading this guide.
By
MIDAO
February 26, 2025
As the United States appears poised to enter what some call its most pro-crypto legislative era, the Decentralized Autonomous Organization (DAO) community watches cautiously. With potential regulatory changes on the horizon, key questions emerge about how new U.S. policies might reshape the DAO landscape and whether offshore incorporation will remain necessary for these decentralized entities.
DAOs have operated in a regulatory gray area in the United States, leading many to seek incorporation in offshore jurisdictions. As Adam Miller, founder of MIDAO, pointed out during a recent How to DAO course livestream: "For a lot of people, they do not want to base their project in the United States due to either current or perceived future regulatory challenges, whether it's securities laws, other crypto regulations, etc."
Notably, DAOs have been largely absent from previous U.S. regulatory discussions. Miller highlights a telling example: "About two years ago, President Biden's White House produced this 100-page report on crypto policy. And in 100 pages, it did not mention DAOs—or anything DAO-related—even once."
Recent developments suggest a potential shift in the U.S. regulatory approach. As mentioned during the podcast, there's anticipation that the incoming administration might be "the most pro-crypto legislative and executive branches in U.S. history."
However, Miller cautions against excessive optimism: "It's going to be great for crypto. I think that's almost without question. It's hard to know exactly what that means, though. At some point, the U.S. Congress will have to write and pass a law. That law will have pros and cons. It's not going to just say, 'Do whatever you want in crypto.'"
Miller anticipates that initial regulatory efforts will focus on more established aspects of the crypto ecosystem: "I wouldn't be surprised if the first set of laws and regulations focus more on tokens, DeFi, and securities laws. And that will affect DAOs—because most DAOs have a token, and securities laws apply to that. But specific DAO-related regulations might not come for another couple of years."
While direct DAO regulations might be further down the road, the community must prepare for how token and DeFi regulations could affect their operations. This is particularly important given that many DAOs rely on tokens for governance and treasury management.
Even with more favorable U.S. regulations, offshore incorporation might remain attractive. Miller draws an interesting parallel with traditional finance: "Even in the traditional corporate world, it's extremely common for companies to have entities all over the world. In venture capital, I read a stat that said 75% to 80% of American VC firms have at least one U.S. entity and one Cayman Islands entity."
The choice of jurisdiction often extends beyond regulatory concerns. Miller explains: "If an investor from Dubai invests in a U.S. company, that investor has to file paperwork with the IRS and the U.S. government. If they can invest in a Cayman entity instead, they will. And no one's really trying to change that in the United States."
The Marshall Islands has emerged as a popular jurisdiction for DAO incorporation, offering unique benefits like the world's first nonprofit LLC structure explicitly designed for DAOs. Miller reflects on how U.S. regulatory changes might affect this: "For us, the U.S. becoming very pro-crypto has both good and bad potential effects. The good is that it's great for crypto and DAOs in general. The bad is that maybe people will feel less afraid of U.S. regulations and be less interested in creating offshore entities."
The trend suggests that DAOs continue to utilize multiple jurisdictions, each serving different purposes. This approach allows organizations to maintain flexibility while managing various regulatory and operational requirements.
As the regulatory landscape evolves, DAOs should consider:
Regardless of regulatory changes, DAOs should focus on building genuine decentralization. As discussed in the podcast, the substance of operations matters as much as legal form – regulators and courts will look at how DAOs operate, not just their legal structure.
Organizations should:
DAOs should prepare for a future where U.S. recognition becomes a reality while maintaining global flexibility. This might mean:
While the prospect of pro-crypto U.S. regulations creates optimism in the DAO community, the reality is likely more nuanced than the simple acceptance or rejection of DAOs. The initial focus on token and DeFi regulations suggests that comprehensive DAO-specific legislation may remain years away.
In this evolving landscape, DAOs should maintain flexibility in their legal and operational structures. Utilizing multiple jurisdictions will continue, even as U.S. regulations become more favorable. The key to success will be building decentralized organizations that adapt to regulatory changes while maintaining their core principles and operational effectiveness.
As the regulatory landscape continues to evolve, the most successful DAOs will be those that can navigate both traditional and decentralized systems, maintaining the innovation and freedom that makes them unique while adapting to necessary regulatory requirements.
