A federal court in California has ruled that members of the Lido DAO can be held liable under state partnership laws. 

Tile the case focuses on the decentralized governing body behind the popular liquid staking protocol (LSP). Nevertheless, this precedent marks a landmark decision with significant implications for decentralized governance.

Court Rules Lido DAO Members Liable Under Partnership Laws

Andrew Samuels brought the lawsuit after purchasing Lido’s native LDO tokens on the secondary market in April and May 2023 via the Gemini exchange. Samuels later filed a class-action suit in December, alleging that the tokens were sold as unregistered securities. He blamed the DAO for his financial losses due to their declining value. 

In his complaint, Samuels argued that the DAO actively solicited token purchases on exchanges, violating securities laws. The court sided with him, ruling that the DAO’s structure and activities subjected it to general partnership liability. 

“The statutory phrase ‘offers or sells’ has been construed broadly to include solicitation of securities purchases. Samuels has sufficiently alleged that Lido DAO solicited these purchases, making it liable,” the court noted.

The ruling, issued on Monday by Judge Vince Chhabria of the US Northern District Court of California, rejected Lido DAO’s claim that it operates as a non-legal entity immune to traditional legal frameworks. Instead, the court classified the DAO as a general partnership, holding its participants accountable for its operations and liabilities. 

The judge identified specific participants, including prominent venture capital (VC) firms Paradigm Operations, Andreessen Horowitz (a16z), and Dragonfly Digital Management. Per the ruling, these VCs pass as general partners due to their active involvement in Lido DAO’s governance and operations. However, another investor, Robot Ventures, was dismissed from the lawsuit due to insufficient evidence of direct participation. 

The court’s decision marks a pivotal moment in the legal treatment of decentralized autonomous organizations (DAOs). Of note is that DAOs are designed to operate without centralized control. However, the court found that Lido DAO’s structure — where token holders govern decisions and earn staking rewards — meets California’s definition of a general partnership. 

“[This case] raises critical questions about the ability of individuals in the crypto ecosystem to shield themselves from liability through novel legal arrangements tied to decentralized financial instruments,” judge Chhabria wrote in his ruling. 

This decision suggests that mere association with a DAO may not be enough to establish liability. Instead, active involvement in governance or operations is required. 

The ruling has sparked concern across the crypto and blockchain community. Miles Jennings, General Counsel and Head of Decentralization at a16z crypto, described the decision as a severe setback for decentralized governance. 

“Under the ruling, any DAO participation (even posting in a forum) could be sufficient to hold DAO members liable for the actions of other members under general partnership laws,” Jennings wrote in a statement on X (formerly Twitter). 

The decision highlights the risks for participants in DAOs, particularly those involved in governance or decision-making processes. 

By rejecting the argument that a DAO’s decentralized structure shields its participants from liability, the court has set a precedent that could affect other DAOs and their contributors. The ruling emphasized that a general partnership can exist even without the explicit intent to form one. It suffices, provided two or more individuals associate to co-own and operate a business for profit. 

This case has far-reaching implications for the crypto industry, particularly for decentralized projects that rely on token-based governance models. Moving forward, DAOs may need to rethink their structures and establish legal entities to protect participants from similar liability risks. 

“Every DAO will require a legal wrapper, a careful choice of jurisdiction, and compliance with laws of security (token) issuance unless the law changes,” Chief Apostle of RWA commented.

The decision signals a challenging road ahead for Lido DAO and its participants as they walk the legal and regulatory pathway. Meanwhile, other DAOs and decentralized projects may face increased scrutiny as courts and regulators examine their operations under traditional legal frameworks. 

Lido DAO’s LDO token is down almost 2% on this news. As of this writing, it is trading at $1.18.

GOAT, once dominating the meme coin market, has faced significant challenges with the emergence of Peanut the Squirrel (PNUT). 

The sudden rise of PNUT has disrupted GOAT’s market position, causing the meme coin to lose its demand. Despite the downturn, GOAT investors remain optimistic about its potential recovery.

A Squirrel Defeats GOAT

The social dominance of GOAT has shifted significantly since October, largely due to PNUT’s arrival. For most of October, GOAT commanded market attention, benefiting from strong investor interest and widespread hype. However, PNUT’s late-month debut captured the spotlight, pushing GOAT out of the top trending tokens.

Currently, PNUT stands as the more popular asset among investors, evidenced by its rising mentions and active participation in social channels. This surge in attention has directly impacted GOAT, whose declining engagement metrics suggest a loss in momentum. The competition between these meme coins is reshaping the market conditions.

Despite the decline, GOAT’s funding rate remains in positive territory, signaling ongoing confidence among traders. Many are placing long contracts, betting on a potential price recovery. This optimism reflects a belief that GOAT still has room to regain its dominance in the meme coin sector.

However, the price drop has introduced uncertainty among investors, with concerns about GOAT’s ability to sustain its market position. The funding rate’s positive stance is encouraging but will require strong market cues to translate into meaningful price gains. Traders are closely watching for signs of a potential reversal.

GOAT Price Prediction: Drawdown Ahead

GOAT’s price has fallen by 25% in the last 24 hours, dropping from an all-time high of $1.36 to $1.01. With the asset nearing the critical $1.00 mark, further declines are likely if bearish momentum continues.

The critical support level sits at $0.72, and a drop to this point would signal more significant losses for investors. Losing this support could exacerbate the bearish outlook, creating challenges for a swift recovery.

Alternatively, if GOAT rebounds from $0.72, the meme coin could make a bid to breach previous highs and form a new ATH. This would invalidate the bearish thesis and re-establish GOAT as a top contender in the meme coin space.

XTZ, the native coin of blockchain network Tezos, has emerged as the top-performing cryptocurrency over the past 24 hours. Its value has surged by 38% to trade at a seven-month high of $1.13 as of this writing.

However, the price increase has triggered growing selling pressure, indicating a potential pullback ahead.

Tezos’ Traders Scamper for Gains

XTZ’s price has climbed by 38% over the past 24 hours and currently ranks as the market’s top gainer. This surge follows the announcement that the staking platform Everstake will support cryptocurrency.

The rally is further fueled by a recent Q3 2024 report from analytics platform Messari. The report highlights strong growth signals for Tezos, including increased transaction volume, more decentralized applications, a rise in upgrade proposals, and a growing active validator count.

However, the recent price jump has prompted many XTZ holders to seek profit, as evidenced by the spike in the coin’s exchange inflow. Per Coinglass, as of Tuesday, XTZ’s exchange inflow is $2.22 million, its highest since the beginning of the year.

When an asset’s exchange inflow spikes, a significant amount of that asset is transferred onto exchanges for sale from wallets or other platforms. This can put downward pressure on XTZ’s price, causing it to shed its recent gains.

Additionally, the overbought readings from the coin’s Relative Strength Index (RSI) confirm the likelihood of a price correction in the short term. At press time, XTZ’s RSI is 74.26. 

The RSI indicator measures an asset’s oversold and overbought market conditions. It ranges between 0 and 100, with values above 70 suggesting that the asset is overbought and due for correction. On the other hand, values below 30 indicate that the asset is oversold and may witness a rebound.

Therefore, XTZ’s RSI of 74.26 suggests it has experienced strong upward momentum and may be due for a correction or pullback. It indicates that the coin’s price has risen too quickly, and there might be an increased risk of a price reversal.

XTZ Price Prediction: Coin May Drop Below $1

XTZ is currently trading at $1.13, holding above the $1.07 support level. If buying momentum weakens, the price may drop to this key support. A failure to maintain $1.07 could push XTZ below $1, potentially falling to $0.97 — a 14% decline from its current value.

If the uptrend continues, XTZ could break past the $1.19 resistance and advance toward $1.40, signaling further bullish momentum.