On April 30, the Texas House of Representatives Committee on Trade, Workforce, and Economic development advanced HB 4518 to the full chamber. This bill recognizes decentralized autonomous organizations (“DAOs”) as legal entities by enabling decentralized unincorporated nonprofit associations (“DUNAs”) in Texas. Texas will be the second state to enact this legislation, which is \u201ca problem\u201d for Representative Keresa Richardson (R-31) who gasped, “We let Wyoming beat us?” affronted that DUNAs were first introduced and signed into state law in 2024 through the Wyoming Decentralized Unincorporated Nonprofit Association Act. Adopting a similar showing of Texas pride while first introducing the bill, HB 4518 author Rep. David Cook (R-96) stressed the importance of passing the bill by declaring “Texas should be the jurisdiction of choice for the digital asset and cryptocurrency revolution.”<\/p>\n\n\n\n\n\n\n\n
Texas can offer legal protection to digital communities by establishing DUNAs.<\/strong><\/p>\n\n\n\n DAOs and other digital communities face significant challenges because of their decentralized nature and anonymous member base. Their lack of legal existence prevents them from contracting with third parties, their attempts to pay taxes compromise their decentralized nature, and their individual members are at risk of being held personally liable for the actions of other members or the association. DUNAs solve these challenges by acting like traditional nonprofits, but in a digital and distributed way because they are protocol-based. During the Committee\u2019s meeting and in support of HB 4518, attorney and tax advisor David Kerr further clarified the importance, testifying that \u201cThe community gets to operate the stored value and improve the protocol. To do that, they need to be able to pay taxes in the United States; the DUNA provides that capability and more to the entity structure.\u201d<\/p>\n\n\n\n DUNAs are legal entities distinct from their members with many rights: DUNAs can sign contracts; hold assets; manage funds; enforce rights, duties, and liabilities in contract and tort, and appoint an agent authorized to receive service of process. A DUNAs legal standing allows it to institute, defend, intervene, or participate in a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or any other form of alternative dispute resolution.<\/p>\n\n\n\n DUNAs are different from traditional organizations because they are \u201cdecentralized\u201d and characterized as nonprofits.<\/strong><\/p>\n\n\n\n Importantly, no single person or small group is in charge. Members collectively make decisions through blockchain by using digital tokens to vote on a \u201csmart contract.\u201d HB 4518 defines these as \u201ca computational process that executes on distributed ledger technology used to automate a transaction.\u201d The characterization of DUNAs as nonprofits offers their members legal protections while supporting democratic decision-making and transparency. Blockchain\u2019s public ledger increases trust and reduces corruption. HB 4518 allows DUNAs to engage in profit-making and apply the resulting profits to the association\u2019s common nonprofit purpose. Though a DUNA may not pay dividends or distribute profit to its members or administrators, it can compensate members and administrators for services rendered to or for the benefit of the association.<\/p>\n\n\n\n HB 4518 provides a clear legal structure for entrepreneurs, investors, and organizations looking for regulatory clarity.<\/strong><\/p>\n\n\n\n Texas Business Courts began hearing cases in September 2024. As the courts begin interpreting commercial law, enabling DUNAs through HB 4518 would create a clear legal framework while maintaining appropriate oversight and establish Texas as a leader in blockchain and Web3 technologies. These associations would create significant economic opportunity by creating jobs and driving economic activity throughout the state. Because HB 4518 establishes that Texas law will govern any DUNA formed in the state, Texas residents would face less legal uncertainty and feel confident that the courts will apply Texas values and legal standards.<\/p>\n\n\n\n In the global trend towards adopting blockchain, HB 4518 looks to position Texas as a forward-thinking state by empowering decentralized nonprofits.<\/p>\n\n\n\n For more information on DUNAs Texas Business Organizations Code, please contact Mitchell Moses<\/a>, Tim Stafford<\/a>, or any member of the Digital Assets and Blockchain Group<\/a>.<\/em> <\/p>\n\n\n\n Disclaimer:<\/strong>\u00a0The content provided is for informational purposes only and does not constitute financial, investment, or legal advice. While our law firm has substantial experience in cryptocurrency law and regulation, we do not offer investment advice or opinions on cryptocurrency as an investment. Consult a financial advisor before investing.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" On April 30, the Texas House of Representatives Committee on Trade, Workforce, and Economic development advanced HB 4518 to the full chamber. This bill recognizes decentralized autonomous organizations (“DAOs”) as legal entities by enabling decentralized unincorporated nonprofit associations (“DUNAs”) in Texas. Texas will be the second state to enact this legislation, which is \u201ca problem\u201d … <\/p>\n