The US Commodity Futures Trading Commission (CFTC) responded on Monday to four legal briefs filed on behalf of Ooki DAO, a decentralized autonomous organization (DAO) accused by the CFTC of violating federal commodities laws by illegally offering leveraged and margin crypto trading products to US investors in September.
The amicus briefs, filed by cryptocurrency legal consortium LeXpunK, the DeFi Education Fund, and venture capital firms Paradigm and Andreessen Horowitz, urged Northern California district court Judge William Orrick to reconsider his earlier order granting the CFTC’s motion for alternative service, which approved the CFTC’s unconventional method of serving notice of the lawsuit on the DAO’s members via a help bot on the DAO’s website and a post on its forum, rather than to DAO members directly.
In its petition to oppose filed Monday, the CFTC argued that serving the legal papers was the only way the DAO made itself available. The CFTC argues the notice was adequately served because the DAO was clearly aware of the case, as evidenced by a tweet from the DAO’s official Twitter account and a conversation between users in a DAO-run forum.
The CFTC’s complaint against Ooki DAO participants (a parallel action to cases already resolved against the DAO’s purported predecessor corporation, bZeroX, and its two founders) has been divisive, even within the CFTC.
Following the announcement of the suit, Commissioner Summer Mersinger issued a rare dissenting opinion, calling the enforcement action “arbitrary and unfair” and claiming that it “affirmatively disincentivizes voting participation in DAO governance generally.”
“The Commission’s approach will have a chilling effect that discourages voting, thereby hindering good governance and the development of the DAO.”
In addition to potentially limiting DAO participation, the amicus papers argued that the CFTC’s action could stifle creative software innovations, which the CFTC’s lawyers disputed in their objection.
According to the CFTC, “The CFTC’s case is not against technology, as Amici claim: the CFTC’s case is against the Ooki DAO—an association that acts and takes collective decisions respecting the Ooki Protocol through voting by its governance token holders,”
The CFTC claimed, “The factors Amici claim disqualify the Ooki DAO as an unincorporated association — variable membership over time, inconsistent voting by members, and different or divergent views and opinions among members — are characteristics of virtually any unincorporated association (or other business entity, for that matter).”
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