Civil Law and Decentralized Autonomous Organization (DAO) Civil Claims in Europe

Important legal position: As of September 2026, there is still very little reported European civil-law case law directly deciding the liability of a DAO as a DAO. European courts have, however, developed substantial case law on the underlying issues—cryptoasset property, smart-contract governance, developer duties, fraud, unjust enrichment, tracing, constructive trusts, jurisdiction and remedies. I therefore distinguish DAO-specific authorities from closely analogous European cryptoasset cases, rather than presenting ordinary crypto cases as if they directly decided DAO liability.

1. Introduction

A Decentralized Autonomous Organization (DAO) is a blockchain-based organization whose governance is generally carried out through:

governance tokens;

smart contracts;

blockchain voting;

decentralized treasury systems;

automated execution;

community proposals;

multisignature wallets;

software protocols.

A traditional company normally has:

shareholders → directors → officers → company → assets.

A DAO may instead have:

token holders → governance proposals → smart contracts → protocol → treasury.

This creates a fundamental civil-law question:

Who is legally responsible when a DAO causes loss to a user, investor, creditor, employee, contractor or third party?

Possible defendants may include:

the DAO itself;

token holders;

active governance participants;

developers;

founders;

delegates;

multisignature wallet controllers;

foundation/company used as the DAO's legal wrapper;

smart-contract administrators;

service providers.

European private law does not generally allow a DAO to escape liability merely by saying that its activities are “decentralized.” The difficult question is instead which existing legal category applies to the DAO and to the people behind it.

2. What Is a DAO in Civil-Law Terms?

A DAO may perform activities normally associated with a legal organization:

hold assets;

enter commercial arrangements;

issue tokens;

lend money;

invest;

operate software;

hire developers;

manage a treasury;

sell products;

provide financial services;

make governance decisions.

The blockchain architecture, however, does not automatically determine the legal personality of the organization.

Thus:

technical decentralization ≠ legal decentralization.

A court can examine the actual relationships between participants.

3. Central Civil-Law Question: Does the DAO Have Legal Personality?

This is the first major question.

A legally incorporated entity may have:

separate legal personality;

separate assets;

limited liability;

registered address;

representatives;

procedural capacity.

A DAO may have none of these.

Consequently, courts may have to determine whether it should be treated as:

a company;

a foundation;

an association;

a partnership;

an unincorporated association;

a contractual network;

a collection of individual participants;

a DAO operating through a separate legal wrapper.

The classification will strongly affect liability.

4. DAO Legal Wrapper

Many DAO projects use a legal wrapper.

For example:

DAO governance

↓

Foundation/company

↓

Employees/developers

↓

Protocol

↓

Users

The foundation or company may hold:

intellectual property;

treasury assets;

contracts;

bank accounts;

employment relationships.

In such a structure, civil claims may be brought against the wrapper rather than against every token holder.

But the existence of a wrapper does not necessarily answer every liability question.

5. DAO Without a Legal Wrapper

The harder situation is:

Token holders govern a protocol directly, there is no incorporated entity, and the DAO conducts commercial activity.

A court may then ask whether the participants have unintentionally created a legally recognised association or partnership.

This is particularly important because ordinary partnership structures in civil-law systems can expose participants to personal liability.

Modern comparative scholarship examining German law notes that the German partnership framework can become relevant where a DAO does not fit into a specific statutory organizational form. Under German law, the modern registered civil partnership has legal capacity but is not equivalent to a limited-liability corporation; partner-liability questions therefore remain significant. (Springer)

6. DAO Liability Theory

A useful model is:

Level 1 — DAO liability

Was the DAO itself a legally recognised entity?

Level 2 — Wrapper liability

Does a foundation/company have responsibility?

Level 3 — Governance liability

Did particular token holders actively control decisions?

Level 4 — Developer liability

Did developers exercise sufficient control or owe duties?

Level 5 — Individual tort/contract liability

Did an individual personally commit a wrongful act?

Level 6 — Smart-contract liability

Did defective code cause the claimant's loss?

7. Case Law 1 — Tulip Trading Ltd v Van der Laan and Others

Court: Court of Appeal of England and Wales
Citation: [2023] EWCA Civ 83

This is one of the most important European authorities for DAO-like decentralized governance.

Tulip Trading alleged that hackers stole control of approximately US$4 billion worth of Bitcoin and that developers responsible for relevant blockchain software owed fiduciary and other duties.

The Court of Appeal held that it was realistically arguable that software developers exercising discretionary control over network software could owe fiduciary duties to cryptocurrency owners. It also held that, on the assumed facts, those duties could potentially include taking positive action to protect owners' assets. (ZoomLaw)

Why it matters for DAOs

A DAO often claims:

“Nobody controls the system.”

Tulip Trading demonstrates that a court may instead ask:

Who actually has meaningful discretionary control?

Relevant evidence may include:

control of protocol code;

ability to alter smart contracts;

governance authority;

control of upgrade mechanisms;

multisignature authority;

ability to freeze or recover assets.

Important limitation

The Court of Appeal did not finally hold that all blockchain developers owe fiduciary duties.

It held that the pleaded case was sufficiently arguable to proceed.

Therefore:

Tulip Trading = potentially important duty/liability principle, not a universal DAO-liability rule.

8. Case Law 2 — AA v Persons Unknown

Court: High Court of England and Wales
Citation: [2019] EWHC 3556 (Comm)

The case involved Bitcoin paid as ransom following a cyberattack.

The Court concluded that cryptoassets such as Bitcoin could constitute property for purposes of proprietary remedies. The court relied on the characteristics of cryptoassets and the UK Jurisdiction Taskforce's analysis. (bailii.org)

DAO significance

Suppose a DAO treasury contains:

Bitcoin;

Ether;

stablecoins;

governance tokens.

If those assets are treated as property, civil claims can potentially involve:

proprietary injunctions;

tracing;

freezing orders;

restitution;

constructive trusts;

recovery of misappropriated assets.

Therefore:

A DAO treasury is not necessarily legally invisible merely because it exists on blockchain.

9. Case Law 3 — Ion Science Ltd v Persons Unknown

Court: High Court of England and Wales
Date: 21 December 2020

The claimants alleged an ICO-related cryptocurrency fraud involving approximately £577,000 in Bitcoin.

The Court granted:

proprietary relief;

worldwide freezing relief;

disclosure orders;

orders directed to cryptocurrency exchanges.

The case is significant because the court treated the cryptocurrency as property and used existing civil-procedure mechanisms to trace and preserve it. (CaseMine)

DAO significance

Consider:

DAO treasury → hacked wallet → exchange → unknown beneficiary.

The claimant may seek:

tracing → identification → freezing → recovery.

The decentralized nature of the underlying blockchain does not automatically prevent ordinary civil remedies.

10. Case Law 4 — D'Aloia v Persons Unknown and Others

Court: High Court of England and Wales
Citation: [2022] EWHC 1723 (Ch)

Mr D'Aloia alleged that approximately:

2.1 million USDT; and

230,000 USDC

had been fraudulently misappropriated.

The Court considered:

fraudulent misrepresentation;

deceit;

unlawful means conspiracy;

unjust enrichment;

proprietary claims;

jurisdiction;

cryptoasset tracing;

constructive trust;

disclosure.

The court found serious issues to be tried and granted freezing/disclosure-related relief. It also accepted, on the applicable interim standard, an English connection to the cryptoassets and considered the governing-law implications under Rome II. (bailii.org)

DAO significance

A DAO victim may similarly allege:

fraudulent governance proposal → treasury transfer → wallet → exchange.

The blockchain record can potentially provide evidence for tracing the transaction.

11. Case Law 5 — Jones v Persons Unknown

Court: High Court of England and Wales
Citation: [2022] EWHC 2543 (Comm)

This was a significant final judgment concerning recovery of cryptocurrency following fraud.

The Court held that the claimant was entitled to delivery up of Bitcoin and continued proprietary/freezing relief. It also considered the position of a cryptocurrency exchange as a constructive trustee. (Practical Law)

DAO significance

A DAO may hold tokens through:

treasury wallets;

multisignature wallets;

protocol-controlled accounts.

If those assets are misappropriated, proprietary remedies may become central.

The claimant may seek recovery of the actual cryptoasset rather than merely monetary damages.

12. Case Law 6 — Osbourne v Persons Unknown

Court: High Court of England and Wales
Citation: [2022] EWHC 1021 (Comm), followed by later judgments including [2023] EWHC 39 (KB)

The case concerned stolen NFTs.

The High Court accepted that there was at least a realistically arguable case that NFTs could constitute legal property and granted protective remedies including freezing relief and disclosure. (dorsey.com)

The later judgment involved the continued protection of NFTs and issues concerning unknown defendants and alternative service. (vLex)

DAO significance

DAO assets are not limited to cryptocurrencies.

A DAO may own or control:

NFTs;

digital licences;

tokenized securities;

digital art;

virtual land;

governance tokens.

The Osbourne reasoning demonstrates that civil law can provide proprietary remedies even for novel blockchain-based assets.

13. Case Law 7 — Fetch.ai Ltd v Persons Unknown

Court: High Court of England and Wales
Citation: [2021] EWHC 2254 (Comm)

Fetch.ai involved cryptocurrency-related fraud and applications for information concerning transactions.

The case is part of the developing European crypto-litigation jurisprudence involving:

persons unknown;

exchanges;

disclosure;

tracing;

cryptoasset property.

The English judiciary itself lists Fetch.ai among its significant digital-dispute cases and identifies it as concerning applications for information from cryptocurrency exchanges. (Courts and Tribunals Judiciary)

DAO significance

In DAO litigation, the claimant may know:

blockchain address;

but not:

real identity;

exchange account holder;

governance participant;

ultimate recipient.

Exchange disclosure can therefore become essential.

14. Case Law 8 — Skatteverket v Hedqvist, C-264/14

Court: CJEU
Date: 22 October 2015

This is not a DAO-liability case.

It is nevertheless important for the legal recognition of cryptocurrency within EU law.

The CJEU held that exchanges between traditional currencies and Bitcoin fell within the VAT exemption for transactions concerning currency used as legal tender. (curia)

DAO significance

It demonstrates that EU law does not treat Bitcoin as legally nonexistent simply because it is digital.

However:

Hedqvist does not establish that all cryptoassets are legal tender or that every DAO has legal personality.

It is a supporting authority for the legal-economic treatment of virtual currencies.

15. What These Cases Actually Establish

The cases do not establish:

“Every DAO is liable.”

Instead, they establish useful underlying propositions:

16. Is a DAO a Legal Person?

There is no single general European DAO legal-personality rule.

The answer depends on:

applicable national law;

DAO structure;

legal wrapper;

governance arrangements;

contractual documentation;

location;

commercial activity.

A DAO might therefore be:

A. Separate legal entity

Where incorporated under applicable law.

B. Foundation-controlled DAO

Foundation has legal personality while DAO performs governance.

C. Company-controlled DAO

Company legally owns/operates assets while token holders exercise governance rights.

D. Partnership

Participants may potentially be treated as partners.

E. Association

An unincorporated association may exist depending on national law.

F. Contractual network

Participants may be bound by agreements without forming a separate legal person.

G. Legally uncertain collective

No obvious statutory category fits.

17. DAO and Partnership Liability

This is one of the most important issues.

If a DAO is characterised as an ordinary partnership, participants can potentially face significantly greater exposure than shareholders in a limited-liability company.

In German civil-law scholarship, for example, the ordinary partnership framework is considered a possible fallback for organizations that do not fit another legal form. The modern German partnership regime gives certain partnerships legal capacity, but does not transform them into limited-liability corporations. (Springer)

Possible consequence

DAO debt

↓

Partnership liability

↓

Individual participant liability

This is why DAO participants often seek a legal wrapper.

18. Does Holding a DAO Token Automatically Create Liability?

Not necessarily.

A court should distinguish between:

Passive token holder

holds tokens;

does not vote;

does not control treasury;

does not participate in management.

Active governance participant

proposes resolutions;

votes repeatedly;

controls treasury;

delegates voting power;

directs developers.

Core developer

controls protocol code;

controls upgrades;

controls administrator keys.

Multisig signer

controls treasury transfers.

The more active the participant's role, the stronger the argument for personal responsibility may become.

But there is no general European rule saying:

One DAO token = automatic personal liability.

19. Governance Voting and Civil Liability

Suppose a DAO votes:

“Transfer €5 million from the treasury to Project X.”

The project subsequently collapses.

Possible claims may involve:

breach of contract;

negligence;

fiduciary duties;

unjust enrichment;

misrepresentation;

wrongful governance decision;

restitution.

The critical question is:

Who made the legally relevant decision?

Blockchain voting records may provide unusually strong evidence of participation.

20. DAO Smart Contracts

A smart contract may contain:

voting rules;

treasury rules;

token rights;

execution conditions;

upgrade mechanisms;

dispute mechanisms.

But:

Code is not necessarily the whole contract.

A court may examine:

white paper;

website;

governance documentation;

token terms;

user terms;

developer agreements;

community representations;

smart-contract code.

A conflict may therefore arise between:

“Code says X”

and

“Contractual/legal relationship says Y.”

21. DAO Smart-Contract Failure

Imagine a DAO lending protocol has a coding defect.

A user loses €2 million.

Possible claims include:

Contract

The user argues that the DAO/protocol promised a functioning service.

Tort

The user argues that developers or controllers negligently designed or maintained the system.

Consumer law

If the user is a consumer, mandatory consumer protection may apply.

Unjust enrichment

A participant may have received assets without sufficient legal basis.

Proprietary claim

If assets were misappropriated rather than merely lost.

22. Developer Liability

Tulip Trading is particularly relevant.

The Court of Appeal found it realistically arguable that developers exercising sufficient control could owe fiduciary obligations to cryptoasset owners. (ZoomLaw)

For a DAO, evidence may concern:

who controls GitHub repositories;

who can approve upgrades;

who controls emergency functions;

who controls private keys;

who can change smart contracts;

who can pause the protocol.

Important principle

The label:

“decentralized”

does not necessarily eliminate the legal significance of actual control.

23. DAO Treasury Liability

A DAO may possess a large treasury.

Potential assets:

ETH;

stablecoins;

Bitcoin;

NFTs;

tokenized assets.

Civil claims may target:

DAO treasury;

treasury controller;

multisignature signers;

foundation;

recipient of funds.

If assets are traceable, proprietary remedies may be particularly valuable.

The cryptoasset cases demonstrate that courts can trace and protect digital assets using conventional civil remedies. (bailii.org)

24. Fraudulent DAO Governance Proposal

Example:

A malicious person submits:

“Proposal 458 — transfer 1,000 ETH to Wallet X.”

The proposal falsely claims Wallet X belongs to a legitimate project.

DAO members vote yes.

The assets disappear.

Possible claims:

fraudulent misrepresentation;

negligence;

unjust enrichment;

restitution;

tracing;

constructive trust;

breach of governance duties.

The blockchain voting record could potentially establish:

who proposed;

who voted;

when;

how many tokens;

what wallet received funds.

25. DAO and Unjust Enrichment

Unjust enrichment can be particularly relevant where:

DAO assets → wrongful recipient → recipient retains benefit.

For example:

A governance attack transfers 500 ETH to a participant who had no legitimate entitlement.

A claimant may seek:

restitution;

proprietary recovery;

constructive trust;

tracing.

D'Aloia demonstrates how unjust-enrichment and proprietary claims can be pleaded in cryptocurrency disputes. (bailii.org)

26. DAO and Consumer Claims

DAOs providing services to consumers may face:

unfair terms;

inadequate information;

misleading representations;

defective services;

unfair commercial practices;

privacy violations.

The absence of a traditional company does not necessarily remove consumer protection.

The court may ask:

Who actually offered the service to the consumer?

Potentially:

DAO;

foundation;

protocol company;

developers;

intermediary;

platform operator.

27. DAO and Data Protection

A DAO may process:

wallet addresses;

IP addresses;

KYC information;

governance voting records;

transaction histories;

social-media identifiers.

The GDPR question may be:

Who is the controller?

Potential candidates include:

foundation;

protocol operator;

development company;

governance body;

individual participants.

A DAO's decentralized architecture can therefore create a controller-identification problem.

28. DAO and GDPR Civil Damages

If unlawful processing causes damage, Article 82 GDPR may become relevant.

The CJEU's C-300/21 jurisprudence requires:

GDPR infringement + damage + causal link.

Therefore:

DAO processing personal data unlawfully ≠ automatic damages.

Actual legally recognised damage and causation remain important.

29. DAO and Intellectual Property

DAO disputes can concern:

open-source software;

smart-contract code;

trademarks;

NFTs;

documentation;

governance interfaces.

Possible claims include:

copyright infringement;

trademark infringement;

breach of licence;

confidential information;

software licence disputes.

If a DAO developer uses third-party code without respecting its licence, liability may fall upon the legal entity or individuals responsible, depending on the applicable law.

30. DAO and Employment

A DAO may hire:

programmers;

community managers;

researchers;

moderators;

designers.

A major question is:

Who is the employer?

A token vote does not automatically answer this.

Possible legal employer:

foundation;

company;

partnership;

individual founder;

service company.

Employment claims can include:

wages;

dismissal;

working time;

discrimination;

social security;

intellectual-property ownership.

31. DAO and Tort Liability

A tort claim may arise from:

negligent code;

inadequate cybersecurity;

misleading information;

wrongful asset transfer;

privacy violations;

defective services.

The claimant generally needs to establish the elements required by the applicable national law.

A DAO's decentralized structure may make identification of the legally responsible person difficult, but it does not necessarily eliminate the underlying duty.

32. DAO and Contractual Liability

A user may argue:

“I entered into a contractual relationship with the protocol.”

The court must identify:

who was the contracting party;

what terms were incorporated;

whether the smart contract itself was the contract;

whether a foundation/company acted as intermediary;

applicable law;

jurisdiction.

The DAO's website, token documentation and governance rules can therefore become evidence.

33. DAO and Fiduciary Duties

Fiduciary concepts may arise where a participant:

controls assets belonging to others;

exercises discretionary authority;

acts on behalf of users;

manages a treasury;

has power to affect beneficiaries' property.

Tulip Trading illustrates the possibility of fiduciary analysis where developers have sufficient control over blockchain software and users' assets. (ZoomLaw)

However:

Not every developer or token holder is automatically a fiduciary.

34. DAO and Multisignature Wallets

A multisig wallet creates an interesting civil-law problem.

Suppose:

5 signers → 3 signatures required

If three signers transfer €10 million improperly:

Was the DAO responsible?

Were the three signers personally responsible?

Did they act within their authority?

Was the transfer fraudulent?

Can the assets be traced?

The answer depends on the DAO's organizational and contractual structure.

35. DAO and Governance Delegates

A governance token holder may delegate voting power.

This creates a distinction between:

token ownership

and

governance control.

A delegate exercising 20% of voting power may have substantially greater factual influence than a passive token holder with 20% of tokens.

Civil liability should therefore focus on actual functions, not merely wallet balances.

36. DAO and Decentralization Claims

A defendant might say:

“Nobody controls the DAO.”

A claimant may respond:

“The developers controlled the upgrade keys.”

or:

“A small group controlled 70% of voting power.”

or:

“The foundation controlled the treasury.”

The court may examine the economic and technical reality.

Thus:

formal decentralization ≠ necessarily factual decentralization.

37. DAO and Legal Personality: Comparative Structure

38. Jurisdiction

DAO participants may be located:

France;

Germany;

Switzerland;

Netherlands;

UK;

United States;

Singapore;

Cayman Islands.

A DAO may have no physical headquarters.

Civil litigation therefore raises:

where the defendant is domiciled;

where the damage occurred;

where assets are located;

where the contract was performed;

applicable law;

service on unknown defendants.

D'Aloia illustrates the willingness of courts to address jurisdictional questions in cross-border crypto disputes. (bailii.org)

39. Lex Situs of DAO Assets

A DAO may have:

Treasury wallet → blockchain → globally distributed nodes.

Traditional property law asks:

Where is the asset?

Crypto litigation has required courts to develop approaches to the location of cryptoassets.

D'Aloia considered, at the interim stage, the proposition that the situs of the relevant cryptoassets could be connected to the owner's domicile and used that analysis in determining applicable law and jurisdiction. (bailii.org)

This is highly relevant to cross-border DAO litigation.

40. Unknown Defendants

DAO disputes can involve pseudonymous:

developers;

token holders;

governance attackers;

wallet owners.

The English cases show that courts can permit claims against persons unknown and use disclosure orders against intermediaries.

This is particularly relevant because blockchain identities are frequently represented by wallet addresses rather than legal names.

41. Service by Blockchain-Based Methods

Osbourne and D'Aloia demonstrate the procedural flexibility developing around crypto disputes.

Courts have considered alternative service mechanisms where ordinary service is difficult.

This is significant for DAO disputes because:

the defendant may have no known physical address.

42. Evidence in DAO Litigation

The claimant should preserve:

Blockchain evidence

transaction hashes;

wallet addresses;

token balances;

governance votes.

Technical evidence

smart-contract code;

GitHub history;

upgrade records;

multisig transactions;

administrator keys.

Organizational evidence

DAO constitution;

governance documents;

white paper;

token terms;

foundation documents.

Communication evidence

Discord;

Telegram;

forums;

emails;

governance proposals.

Financial evidence

treasury records;

exchange records;

accounting documents.

43. Who May Be Sued?

A claimant may investigate:

1. DAO

If legally recognised.

2. Foundation

If it operates the DAO.

3. Company

If it controls protocol activities.

4. Developers

If they personally owed duties or committed wrongful acts.

5. Governance participants

If they personally participated in the wrongful conduct.

6. Multisig signers

If they improperly authorised transfers.

7. Exchanges

Where they hold or control misappropriated assets and the applicable legal requirements are satisfied.

44. DAO Liability Is Not Automatically Joint and Several

This is a critical civil-law point.

It would be incorrect to state:

“Every DAO token holder is automatically jointly liable.”

Liability depends on:

legal classification;

national law;

participation;

contractual arrangements;

authority;

wrongful conduct;

causation.

Partnership classification can produce much broader liability, but that classification itself must be established.

45. DAO Token Holder vs Shareholder

46. DAO and Limited Liability

A DAO can obtain limited-liability protection through an appropriate legal wrapper.

For example:

DAO governance → limited company/foundation → assets/contracts

This can separate:

organization assets;

participant assets.

Without such a structure, participants may face substantially greater uncertainty.

47. DAO Treasury Theft

Suppose a hacker obtains the private key to the DAO treasury.

Possible civil claims:

proprietary claim;

restitution;

unjust enrichment;

tracing;

constructive trust;

freezing injunction;

disclosure order.

The English cryptoasset cases demonstrate that courts can use these traditional remedies against blockchain-based assets. (bailii.org)

48. DAO Protocol Exploit

Suppose a smart-contract vulnerability causes users to lose €50 million.

Potential defendants could include:

DAO;

developer;

auditor;

foundation;

protocol operator.

But liability depends on proof of:

duty;

breach;

causation;

loss;

applicable contract;

applicable law.

A smart-contract exploit is not automatically negligence.

49. DAO Auditor Liability

If an independent smart-contract auditor states:

“The protocol has no critical vulnerabilities,”

and a major vulnerability immediately causes loss, users might consider claims against the auditor.

Potential causes include:

negligent misstatement;

professional negligence;

contract;

consumer law.

But the auditor's engagement terms and disclaimers become highly important.

50. DAO Oracle Failure

Many DeFi DAOs depend upon oracles.

If an oracle supplies incorrect information:

Wrong price → liquidation → loss.

Potential claims could involve:

DAO;

oracle provider;

developers;

governance participants.

The legal analysis depends on who controlled the oracle and what duties were undertaken.

51. DAO Governance Attack

A governance attack occurs when an attacker obtains sufficient voting power to pass a malicious proposal.

Possible legal issues:

fraudulent acquisition of voting power;

manipulation;

breach of governance rules;

wrongful treasury transfer;

unjust enrichment.

Blockchain voting records may provide valuable evidence.

52. DAO and Good Faith

Civil-law systems commonly recognise concepts relating to:

good faith;

abuse of rights;

contractual loyalty;

reasonable conduct.

A DAO participant may therefore face questions concerning whether governance power was exercised for an improper purpose.

The precise doctrine depends upon national law.

53. DAO and Abuse of Governance Rights

Example:

A person obtains 60% voting power.

They vote to:

transfer the entire treasury to themselves.

Even if the smart contract technically permits the transaction, a court may need to consider whether the transaction violates:

contractual obligations;

good-faith principles;

fiduciary duties;

unjust-enrichment rules;

corporate/partnership principles.

Thus:

Technically executable ≠ necessarily legally immune.

54. DAO and Smart-Contract Immutability

“Code is law” is not necessarily a complete civil-law principle.

A blockchain transaction may be technically irreversible.

But civil law can still provide:

restitution;

damages;

injunctions;

constructive trusts;

declarations;

tracing.

Jones, AA and D'Aloia demonstrate how conventional civil remedies can operate alongside blockchain technology. (bailii.org)

55. DAO and Insolvency

Another difficult issue arises when:

DAO treasury < DAO liabilities.

Questions include:

Is the DAO an insolvent legal person?

Who owns the treasury?

Are token holders creditors?

Are users creditors?

Is there a partnership?

Can creditors seize DAO assets?

Who represents the DAO?

If no legal entity exists, traditional insolvency procedures may be difficult to apply.

56. DAO and Consumer Deposits

Consider a DeFi DAO accepting:

€100 million from users.

If the protocol fails, users may argue:

breach of contract;

restitution;

negligence;

misrepresentation;

financial-services violations.

The existence of DAO governance does not automatically remove mandatory financial or consumer law.

57. DAO and Financial Regulation

Where a DAO performs financial activities, other legal regimes may become relevant.

Potential areas include:

MiCA;

securities law;

investment services;

AML/KYC;

consumer protection;

payment law;

market-abuse rules.

A DAO's decentralized character does not automatically exempt it from regulation.

58. Civil Liability and MiCA

MiCA is principally a regulatory framework rather than a universal DAO civil-liability statute.

It can nevertheless affect:

cryptoasset service providers;

issuers;

governance structures;

disclosures;

market conduct.

A civil claimant may use regulatory obligations as part of the broader legal analysis where national law permits.

59. DAO and GDPR

A DAO may have difficulty answering:

“Who is the data controller?”

because decision-making can be distributed.

Nevertheless, decentralized architecture does not automatically prevent GDPR application.

Potential questions include:

Who determines the purpose?

Who determines means?

Who receives data?

Who operates the interface?

Who controls governance?

60. DAO and Intellectual Property

DAO participants may claim:

ownership of code;

copyright;

licence rights;

trademark rights.

The DAO's open-source character does not mean:

“Everything is free to use.”

The applicable open-source licence controls permitted use.

61. DAO and Employment Liability

A DAO may operate through a foundation or company employing developers.

If a developer is injured or underpaid:

The foundation/company may be the employer.

If there is no wrapper, the legal identity of the employer becomes more difficult.

This demonstrates why legal structuring is important.

62. DAO and International Private Law

DAO litigation may require determining:

Jurisdiction

Which court?

Applicable law

Which national law?

Asset location

Where is the token?

Defendant location

Where is the token holder?

Contract location

Where was the agreement made/performed?

Damage location

Where did the claimant suffer loss?

D'Aloia demonstrates the complexity of these issues in cryptoasset disputes. (bailii.org)

63. Civil Remedies Available

Potential remedies include:

Damages

Compensation for proven loss.

Restitution

Return of wrongfully obtained benefits.

Proprietary injunction

Preventing dealings with the asset.

Freezing order

Preventing dissipation.

Tracing

Following the asset through blockchain transactions.

Disclosure

Obtaining information from exchanges or intermediaries.

Constructive trust

Recognising another party's beneficial interest in appropriate circumstances.

Declaration

Declaring ownership or legal rights.

64. DAO Claim Structure

A typical claim could be structured as:

DAO activity

↓

Legal relationship

↓

Duty/contract/right

↓

Wrongful conduct

↓

Loss

↓

Causation

↓

Remedy

For example:

DAO treasury → wrongful governance transfer → breach of duty → €5m loss → proprietary claim + damages.

65. Important Distinction: DAO Liability vs Token Liability

The token itself does not automatically determine liability.

The legal analysis should distinguish:

Token

from

Token holder

from

Governance participant

from

Developer

from

Foundation

from

DAO.

This is one of the most important points in DAO civil litigation.

66. Case-Law Summary

The English authorities are comparative European common-law authorities, not civil-law decisions. The CJEU's Hedqvist judgment is EU-wide and is useful for the broader legal recognition of cryptocurrency. The scarcity of direct DAO judgments in continental European civil-law courts should not be concealed by relabelling ordinary crypto cases as DAO cases. (curia)

67. Core European Civil-Law Approach

A European court considering a DAO claim would likely need to proceed in stages:

Step 1 — Identify the DAO's legal structure

Is there a foundation/company/association?

Step 2 — Identify the applicable national law

Which country's private law governs?

Step 3 — Determine legal personality

Can the DAO sue or be sued?

Step 4 — Identify responsible persons

Who actually controlled the activity?

Step 5 — Identify the legal relationship

Contract, tort, property, fiduciary relationship, partnership, consumer relationship?

Step 6 — Determine the wrong

Was there:

fraud;

negligence;

breach;

misappropriation;

unlawful enrichment;

data violation?

Step 7 — Establish causation

Did the conduct cause the loss?

Step 8 — Quantify damage

What amount was actually lost?

Step 9 — Select remedy

Damages, restitution, injunction, tracing, etc.

68. Practical Example

Suppose DAO-X operates a decentralised lending platform.

It has:

20,000 token holders;

€100 million treasury;

five developers;

a foundation in Switzerland;

smart contracts;

a multisig wallet controlled by seven people.

A coding defect causes €15 million in user losses.

Possible claim against DAO-X

If legally recognised.

Possible claim against foundation

If it operated the protocol.

Possible claim against developers

If they had a relevant duty and negligently failed to correct a known defect.

Possible claim against multisig signers

If they wrongfully transferred assets.

Possible proprietary claim

If assets were diverted rather than simply lost.

The court would not simply ask:

“Is DAO-X decentralized?”

It would ask:

What legal relationships actually existed and who had what legal duties?

69. Main Defences

DAO defendants may argue:

DAO has no legal personality.

Defendant was merely a passive token holder.

No contractual relationship existed.

No duty of care existed.

Defendant did not control the protocol.

The loss resulted from an independent hack.

The claimant accepted smart-contract risks.

The claimant suffered no legally recognised damage.

No causation exists.

The defendant did not receive the assets.

The DAO's legal wrapper bears responsibility.

The claimant sued the wrong party.

The claim is governed by another jurisdiction.

The transaction was irreversible under the protocol.

70. Claimant's Arguments

Claimants may argue:

DAO was economically organised as a business;

token holders collectively controlled it;

active governance participants exercised management authority;

developers exercised discretionary control;

the foundation acted as the DAO's legal representative;

users entered contractual relationships with the DAO/protocol;

the DAO controlled treasury assets;

participants benefited financially;

defendants breached duties;

defendants received wrongfully transferred assets;

blockchain evidence identifies the responsible participants.

71. Most Important Principle

The central principle can be stated simply:

A DAO is a technological structure, not automatically a legal category.

Therefore:

DAO ≠ automatic immunity

and also:

DAO ≠ automatic personal liability of every token holder.

The court must identify the applicable legal structure and the conduct of particular participants.

72. Future Development

European DAO litigation is likely to focus increasingly on:

legal personality;

partnership liability;

DAO foundations;

developer duties;

governance-token holders;

smart-contract defects;

treasury recovery;

cryptoasset property;

consumer protection;

GDPR;

MiCA;

insolvency;

cross-border jurisdiction;

DAO taxation;

AI-governed DAOs;

autonomous agents;

decentralized physical infrastructure;

tokenized real-world assets.

The European Central Bank has also identified the absence of a clear DAO regulatory framework as a continuing legal and institutional issue. (European Central Bank)

73. Exam-Style Conclusion

Civil claims involving DAOs in Europe represent an emerging intersection of civil law, company law, contract law, property law, tort law, financial regulation and blockchain technology.

The absence of traditional corporate personality does not necessarily make a DAO immune from civil litigation. Courts can examine:

the DAO's actual organizational structure;

legal wrappers;

governance arrangements;

token-holder participation;

developer control;

smart-contract functions;

treasury ownership;

contractual relationships.

The European cryptoasset cases demonstrate that courts can already provide conventional civil remedies—such as damages, proprietary injunctions, freezing orders, tracing, disclosure and restitution—for blockchain-related disputes. Tulip Trading is particularly significant because it shows that the supposed decentralization of a blockchain system does not necessarily prevent courts from examining whether identifiable developers exercise sufficient control to owe legal duties. (ZoomLaw)

At the same time, it would be legally inaccurate to say that Europe has already established a uniform rule that every DAO is a partnership or that every DAO token holder is personally liable.

The better legal formula is:

DAO structure → legal classification → identification of control → duty/contract/right → wrongful conduct → causation → damage → civil remedy.

Ultra-Basic Keywords

DAO – Decentralized Autonomous Organization
Token Holder – person holding governance tokens
Governance Token – token giving voting/governance rights
Smart Contract – blockchain-based executable code
DAO Treasury – assets controlled by DAO
Legal Wrapper – company/foundation used by DAO
Legal Personality – separate legal existence
Partnership – organization potentially creating personal liability
Developer Liability – responsibility of software developers
Governance Liability – responsibility arising from decision-making
Fiduciary Duty – duty arising from a special position of trust/control
Tort – civil wrong
Contract – legally enforceable agreement
Unjust Enrichment – wrongful benefit requiring restitution
Tracing – following misappropriated assets
Proprietary Claim – claim concerning ownership of an asset
Constructive Trust – equitable mechanism protecting another's property interest
Freezing Order – prevents dissipation of assets
Disclosure Order – requires information revealing relevant parties/assets
Cryptoasset – blockchain-based digital asset
NFT – non-fungible token
Decentralization – distribution of control
Actual Control – practical ability to influence the system
Tulip Trading – possible developer duties
AA – Bitcoin as property
Ion Science – crypto tracing and proprietary relief
D'Aloia – crypto fraud and unjust enrichment
Jones – crypto recovery and constructive trust
Osbourne – NFT property
Fetch.ai – exchange disclosure
Hedqvist – EU legal treatment of Bitcoin.

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