A US court rules bZx protocol meets the definition of a general partnership and finds token holders of the DAO liable for losses from a $55M hack in 2021
Decentralized Autonomous Organizations (DAOs) are beginning to look like general partnerships in the eyes of U.S. courts.
Context & Ripple Effects
Courts have been converging on an answer to the question crypto avoided for years: is a DAO just code, or a legal actor? The SEC flagged it first in its 2017 report concluding DAO tokens were securities, then a judge granted the CFTC a default judgment against Ooki DAO after it failed to respond to enforcement, establishing that DAOs are liable entities even without formal structure.
The bZx ruling goes further than both: rather than treating the DAO as an amorphous defendant, it reaches individual token holders and holds them jointly responsible under the general-partnership framework. That puts it on a collision course with rulings like the Uniswap dismissal, which absolved developers because software itself cannot be sued — liability is migrating from the code layer to the people holding governance tokens.
First-order effects
- bZx token holders now face direct financial exposure for losses from the $55M hack, since partnership law makes each member potentially responsible for the group's obligations.
- The ruling gives plaintiffs and regulators a working template: suing a DAO no longer requires naming founders or the protocol, only its token holders.
Second-order effects
- DAO participants across DeFi will push projects toward legal wrappers (foundations, LLCs, offshore entities) and insurance precisely to escape unlimited partnership liability — a compliance cost that favors large, capitalized protocols over community-run ones.
- The divergence between the Uniswap dismissal and this ruling forces developers and investors to price legal risk by jurisdiction and court, fragmenting where DeFi teams choose to incorporate and govern.
Third-order effects
- If courts keep applying partnership logic, anonymous collective governance becomes structurally untenable in the US: either DAOs formalize into identifiable legal entities or participation concentrates among those willing to accept personal liability.
- Regulators gain a second enforcement lever alongside the securities route — instead of arguing tokens are securities, they can hold holders accountable as business partners, which applies even where the SEC's approach has been retreating.
The trend: US courts are progressively assigning traditional legal identities to DAOs — security issuer, liable defendant, now general partnership — turning pseudonymous token holders into personally accountable actors.