DAOs and French Law: What Legal Status?

Introduction: The Legal Challenge of Decentralized Organizations

How to legally frame organizations with no hierarchy and no borders?

DAOs (Decentralized Autonomous Organizations) represent one of the most radical innovations in the blockchain ecosystem: organizations governed by code, without traditional hierarchy, where decisions are made collectively by governance token holders.

MakerDAO manages over $5 billion in collateral. Uniswap processes billions of dollars in daily trades. Aave, Compound, Lido... These protocols are governed by DAOs that often have no formal legal existence.

For French participants, this situation raises fundamental questions: Who is liable in case of problems? How to sign a contract? What taxation applies? This guide analyzes the legal status of DAOs under French law and proposes structuring solutions.

Disclaimer: This document is informational and does not constitute legal advice. The legal qualification of DAOs is subject to doctrinal debate and the absence of established case law creates significant uncertainty. Consult a specialized lawyer for your situation.

Table of Contents

1. What Is a DAO?
2. The Legal Problem
3. Qualification Under French Law
4. Legal Wrapper Solutions
5. International Comparison
6. Governance and Tokens
7. Taxation
8. Practical Cases
9. Recommendations
10. FAQ

1. What Is a DAO?

Organizations governed by code and governance tokens.

1.1 Technical Definition

A DAO is an organization whose operating rules are encoded in smart contracts on a blockchain, and whose governance is collectively exercised by token holders.

Fundamental characteristics:

1.2 Typical Operation

1. Proposal
   └─→ A member submits a proposal (text + code)

2. Discussion
   └─→ Debate on forums (Discourse, Discord)

3. On-chain Vote
   └─→ Holders vote with their tokens
   └─→ Quorum and majority required

4. Execution
   └─→ If adopted, the smart contract executes automatically
   └─→ Timelock possible (security delay)

1.3 Examples of Major DAOs

1.4 Types of DAOs

2. The Legal Problem

Without legal existence, who signs contracts and assumes liability?

2.1 Absence of Legal Personality

Under French law, to exist legally, an organization must generally:

• Be constituted according to a legal form (company, association...)
• Be registered (RCS, RNA...)
• Have identified legal representatives

A pure DAO meets none of these conditions.

2.2 Practical Consequences

2.3 Liability Questions

Problematic scenario:

A DAO votes to fund a project that causes harm to a third party. Who is liable?

• The smart contract developers?
• The members who voted "for"?
• All token holders?
• Nobody?

Without a legal structure, the risk is qualification as:

• De facto company: Joint and unlimited liability of all "partners"
• Undisclosed partnership: Same
• Co-ownership: Proportional but complex liability

2.4 The Specter of the De Facto Company

"There is a de facto company when two or more persons behave as partners without having formed between them one of the companies recognized by law."

Source: Established case law, Cass. Com.

Qualification criteria:

• Contributions (tokens, work, expertise)
• Sharing of profits and losses
• Affectio societatis (intent to collaborate)

Consequence: Joint and unlimited liability on the personal assets of each "partner."

3. Qualification Under French Law

The de facto company risk and its consequences for members.

3.1 Absence of Specific Framework

Unlike Wyoming (USA) which created a "DAO LLC" status, France has no specific legal regime for DAOs.

DAOs are therefore analyzed under general law, with multiple potential qualifications.

3.2 Possible Qualifications

3.3 De Facto Company: The Main Risk

Qualification indicators:

Relevant case law:

• Simple token holding without active participation may not suffice
• Participation in votes strengthens the qualification risk
• Active members (core contributors) are more exposed

3.4 Undisclosed Partnership

More favorable than de facto company as it can organize liability:

"The undisclosed partnership is not registered. It can be proven by all means. The partners freely agree on the purpose, operation, and conditions of the partnership."

Source: Article 1871 of the Civil Code

Advantage: The contract (smart contract + terms of service) can limit liability between partners.

Limitation: Toward third parties, liability follows general law.

4. Legal Wrapper Solutions

Association, SAS, or foundation: how to choose the right structure?

4.1 The "Wrapper" Principle

A legal wrapper is a legal structure that "wraps" the DAO to give it legal existence:

              ┌─────────────────────────┐
              │    Legal wrapper        │
              │  (Association, SAS...)  │
              │                         │
              │    ┌───────────────┐    │
              │    │     DAO       │    │
              │    │ (smart        │    │
              │    │  contracts)   │    │
              │    └───────────────┘    │
              │                         │
              └─────────────────────────┘
                         │
                         ▼
              Interface with the legal world
              (contracts, accounts, employees...)

4.2 1901 Law Association

Advantages:

• Simple and inexpensive to create
• No minimum capital
• Favorable taxation (if non-profit)
• Legal personality

Disadvantages:

• Non-profit purpose (theoretically)
• Traditional governance (bureau, GA)
• No profit distribution to members

DAO adaptation:

• The association is "steered" by the DAO
• On-chain decisions are ratified by the bureau
• Bylaws provide for this articulation

4.3 SAS with Tokenized Governance

Advantages:

• Great statutory freedom
• Full legal personality
• Can distribute dividends
• Limited liability

Disadvantages:

• Formalism (registration, accounting)
• Corporate tax (IS)
• Shareholder identification required

DAO adaptation:

• Shares linked to tokens (or tokenized shares)
• Legally validated on-chain votes
• Adapted shareholder agreement

4.4 Foundation (Switzerland, Netherlands, Cayman)

Swiss Foundation:

• Recognized legal personality
• No members/shareholders (purpose-driven)
• Cantonal authority supervision
• High cost (minimum capital ~50K CHF)

Dutch Foundation (Stichting):

• Simple to create
• No minimum capital
• No members
• Flexible

Cayman Foundation:

• Offshore but recognized
• Very flexible
• No local tax
• Variable reputation

4.5 Wrapper Comparison

5. International Comparison

Wyoming, Switzerland, and Marshall Islands: pioneering jurisdictions for DAOs.

5.1 Wyoming (USA) - DAO LLC

Wyoming was a pioneer with the "Wyoming DAO LLC Act" (2021):

Characteristics:

• Explicit legal recognition of DAOs
• Adapted LLC structure
• Smart contract governance accepted
• Limited member liability

Limitations:

• USA jurisdiction only
• Complex for non-US entities
• US tax applicable

5.2 Marshall Islands - DAO Act

The Marshall Islands adopted an even more favorable regime (2022):

Characteristics:

• DAO as a distinct legal entity
• Entirely on-chain governance possible
• No local registered agent requirement
• Offshore taxation

5.3 Switzerland

Pragmatic approach without specific law:

• Associations and foundations used
• FINMA doctrine on tokens
• "Crypto Valley" (Zug) welcoming
• Case law developing

5.4 Comparison Table

6. Governance and Tokens

The token's qualification determines the entire applicable regulatory framework.

6.1 Governance Token ≠ Financial Instrument?

The qualification of the governance token is crucial:

Distinguishing criteria:

6.2 AMF Position

The AMF has published analyses on tokens:

"A token's qualification depends on its concrete characteristics and not on its denomination. A token giving rights to income or a share of profits could be qualified as a financial instrument."

Source: AMF, Synthesis of responses to the public consultation on ICOs, 2018

6.3 Reclassification Risk

Risk signals:

• Promise of returns (staking rewards, revenue sharing)
• Investment-focused marketing
• Purchase for resale (speculation encouraged)
• Comparison with shares

Favorable signals (utility):

• Effective use in the protocol
• No promise of profit
• Governance as the main function
• Clear documentation

6.4 Recommended Structuring

To minimize reclassification risk:

1. Token = voting rights only (no direct dividend/revenue share)
2. Rewards = compensation for work (not for passive holding)
3. Clear documentation on the utility nature
4. No investment-focused marketing
5. Real utility in the protocol

7. Taxation

Understanding the taxation of income, tokens, and distributions for French participants.

7.1 Taxation of the DAO Itself

Without wrapper:

• No "DAO" taxation (no tax personality)
• But potential taxation of participants

With French wrapper (Association):

• Exemption if non-profit activity
• Corporate tax on ancillary profit-making activities

With French wrapper (SAS):

• IS 15% (< €42,500) or 25%
• Dividends taxed at shareholder level

7.2 Taxation of French Participants

7.3 Shared DAO Revenue

If the DAO distributes revenue (fee sharing, dividends...):

7.4 VAT

Governance tokens are generally VAT-exempt (assimilated to means of payment or financial instruments).

Services rendered via a DAO may be subject to VAT depending on their nature.

8. Practical Cases

Concrete structuring based on DAO types and their objectives.

8.1 DeFi Protocol DAO

Context: Lending protocol with treasury and governance token

Recommended structure:

• Foundation (Switzerland or Cayman) to hold intellectual property
• Labs (company) for development
• DAO for protocol governance
• Treasury managed by multisig (foundation + DAO)

8.2 Investment DAO (LAO)

Context: Group of crypto investors pooling funds

Recommended structure:

• LLC (Delaware or Wyoming) for the investment vehicle
• Smart contracts for governance and votes
• Members = token holders (KYC required)

Caution: High potential regulation (investment fund).

8.3 Service DAO

Context: Collective of freelancers offering services

Recommended structure (France):

• 1901 Association or cooperative (SCOP)
• Members = contributors
• Tokens = voting rights and reputation
• Billing through the structure

8.4 Collector DAO

Context: Group buying NFTs or artwork collectively

Recommended structure:

• SAS or association
• NFTs held by the structure
• Tokens = co-ownership rights
• Exit mechanism provided

9. Recommendations

Essential steps to structure your DAO with full legal security.

9.1 Legal Checklist Before Launching a DAO

• Clearly define the DAO's purpose
• Assess the need for a legal wrapper
• Choose the appropriate jurisdiction
• Draft governance terms (on-chain and off-chain)
• Qualify the token (utility vs security)
• Provide liability mechanisms
• Document participation rules
• Consult a specialized lawyer

9.2 Recommended Typical Structure

For a medium-sized French DAO:

9.3 Necessary Support

9.4 Developments to Watch

• EU legislative work on DAOs (post-MiCA)
• Emerging case law
• International model evolution
• AMF position on governance tokens

10. FAQ

Q1: Can a DAO exist without legal structure in France?

Technically yes, legally risky. A DAO can function on-chain without a wrapper, but its members expose themselves to reclassification as a de facto company with joint unlimited liability.

Q2: Who is liable in case of a DAO hack?

Open question. Without a wrapper, potentially all active members. With a well-structured wrapper, liability can be limited to the structure itself. Developers may be exposed depending on circumstances.

Q3: Do on-chain votes have legal value?

Not directly. On-chain voting has no intrinsic legal value under French law. To be enforceable, it must be "translated" via a wrapper (association bureau decision, SAS resolution...).

Q4: Do all DAO members need to be identified?

Depends on the structure. For simple participation (passive holding), not necessarily. For active members or if the wrapper requires it (SAS = shareholder register), yes.

Q5: What is the best jurisdiction for a DAO?

No universal answer. Wyoming/Marshall Islands for explicit legal recognition, Switzerland for pragmatism and reputation, France if participants are mainly French and want a familiar framework.

Q6: How to pay contributors through a DAO?

Through the legal wrapper. The association or SAS can issue invoices, pay salaries or fees. Payments in tokens remain possible but with euro valuation for declaration purposes.

Q7: Can a DAO own real assets (real estate)?

Through a wrapper, yes. The SAS or association can buy real estate. The DAO governs the structure that holds the asset. Attention to complexity (SCI potentially necessary).

Q8: Does simply holding a governance token make me liable?

Probably not for passive holding. The risk primarily concerns active members (core team, large voters, proposers). But legal uncertainty remains.

Conclusion

Key Points

Final Recommendations

1. Do not underestimate the legal risk of a DAO without wrapper
2. Choose a wrapper suited to your objective and size
3. Document everything (terms, governance, roles)
4. Consult experts (lawyer, accountant)
5. Follow developments in legislation and case law

DAOs represent a major innovation in collective organization. Their integration into the French legal framework is an ongoing challenge that requires creativity and caution.

Article written December 2025 — The legal framework for DAOs is constantly evolving.