The blockchain community has debated for years whether Decentralized Autonomous Organizations (DAOs) can or should be analogized to a corporate form and whether they operate to insulate DAO members from legal liabilities. Some states have passed statutes regarding how DAOs are classified, such as Wyoming’s “DAO LLCs” law and Utah’s DAO Act. In Sarcuni v. bZx DAO, a class action pending in the Southern District of California, the liability of DAO members is at the forefront, and the first round of the fight was not a good one for them. On March 27, the court denied a motion to dismiss filed by members of the DAO, finding that the bZx DAO and its successor Ooki DAO are plausibly alleged to be a general partnership in which the members of the DAO are the partners. This is a case of first impression where a DAO’s members (its token holders) could be jointly and severally liable for the actions of the DAO.

bZx DAO operates a blockchain-based software system called bZx Protocol. The bZx Protocol was hacked in 2021, and its users lost approximately $55 million in digital tokens. To compensate those impacted by the hack, the bZx DAO developed and approved a compensation plan, but recoupment would take many years. Plaintiffs, who are 19 bZx Protocol users who lost $1.7 million collectively in the hack, filed a lawsuit in June 2022 claiming that bZx DAO’s negligent security protocols led to the hack.Continue Reading DAO or Dare: The Implications of Sarcuni v. bZx DAO for DAO Member Liability

The start of 2023 hasn’t gone much better for the blockchain and cryptocurrency industry than the end of 2022 did. In declining to dismiss a case alleging that non-fungible tokens (NFTs) called Moments are considered securities, a federal judge held in Friel v. Dapper Labs that a lawsuit against the creator of the NBA Top Shot platform can proceed. By surviving the motion to dismiss, the Plaintiffs plausibly alleged that these NBA Top Shot NFTs, and only these NFTs, could be a security. While the first of its kind to hold that an NFT could be considered a security, this seemingly narrow ruling could have far-reaching implications for other NFT projects and marketplaces.

NBA Top Shot is an NFT platform, owned and operated by Dapper Labs, that allows consumers to buy, sell, and trade Moments (digital video clips of player highlights) on Dapper Lab’s Flow Blockchain. On February 22, 2023, the United States District Court for the Southern District of New York denied Dapper Labs’ motion to dismiss, holding that although “it [is] a close call and the Court’s decision is narrow,” Moments qualify as a security under the Howey test. In its decision to deny the motion to dismiss, the court focused on prongs two and three of the Howey test.Continue Reading Layup or Airball? Court Holds NBA Top Shot NFTs May Be a Security in Friel v. Dapper Labs

How do motion picture studios protect their valuable content from piracy during distribution and exhibition in theaters? A recently awarded Disney patent aims to tackle such issues using blockchain, the distributed ledger technology underpinning popular cryptocurrencies.

The patent, “Blockchain Configuration For Secure Content Delivery” outlines the workings of a blockchain-based content distribution system for delivering, monitoring, and controlling playback of audiovisual works delivered to movie theaters. Through such a system, Disney may achieve an advancement in tackling the ongoing problem of piracy leaks when movies are released in theaters.Continue Reading Disney Patents Blockchain-Based Anti-piracy Movie Distribution System