Ooki DAO shutting down after CFTC court battle.

On June 9, 2023, a US district judge issued a default judgment requiring Ooki DAO to permanently shut down and pay a civil monetary penalty of $643,542. The Commodity Futures Trading Commission (CFTC) had filed a lawsuit against Ooki DAO in September 2022, accusing the decentralized autonomous organization (DAO) of illegally offering retail margin and leverage trading services and acting unlawfully as a futures commission merchant. Ooki DAO missed the January 2023 deadline to respond to the lawsuit, making a default judgment inevitable. The CFTC released a statement on June 9, declaring the lawsuit a “sweeping victory” and detailing the default judgment. The court found that Ooki DAO violated the Commodity Exchange Act and ordered the DAO to shut down its website and remove its content from the internet. The court also held that the Ooki DAO is a ‘person’ under the Commodity Exchange Act and can be held liable for violations of the law, setting a precedent for future cases against DAOs. This case marks one of the first times a government agency has gone after a DAO and its tokenholders, challenging the prevailing belief that DAOs and decentralized finance platforms were largely protected from regulatory scrutiny due to their decentralized nature. The CFTC alleged that the founders of Ooki DAO’s predecessor, bZeroX, intentionally attempted to transfer ownership of their noncompliant trading platform to the Ooki DAO to avoid legal consequences. The court found that a DAO can be sued as a California unincorporated association by the CFTC in a federal case because state law applies to these formalities, and under California law, “mutual consent” to form an association can be established by just holding a DAO token.