Key Highlights
Alabama has become the second state in the United States to officially recognize decentralized autonomous organizations, or DAOs. The state passed the Decentralized Unincorporated Nonprofit Association (DUNA) Act, giving these blockchain-based groups legal status and limited liability protections.
Republican Senator Lance Bell introduced the bill in February, and the House approved it 82-7 with 16 abstentions. Governor Kay Ivey has now signed it into law. The legislation gives DAOs a clear legal framework, allowing members to run projects, make contracts, and grow their organizations without risking personal liability.
DAOs use blockchain-based smart contracts to make decisions instead of traditional boards. They can manage investment funds, run decentralized finance projects, or support other initiatives.
Before Wyoming and Alabama passed DUNA laws, DAOs existed in a legal gray area. Members faced personal liability and struggled to open bank accounts or enforce contracts.
In the case of the DUNA Act in Alabama, DAOs need at least 100 members working together towards a non-profit purpose such as the management of blockchain or smart contracts. DAOs can exist entirely on the blockchain with voting, proposals, and decisions recorded on the blockchain.
The DAOs recognized can hold property, enter into contracts, institute suits, with the members and administrators being exempt from liability. According to Miles Jennings of a16z Crypto, “Decentralized governance is essential to crypto’s future—it’s one of the core constructs in market structure legislation.”
West Virginia is considering a similar law, allowing decentralized nonprofit groups to hold property, carry out nonprofit activities, and protect members from liability. Wyoming led the way by first recognizing DAOs in 2021, allowing them to register as “DAO LLCs,” and later passed its own DUNA Act in 2024, providing a purpose-built legal framework for decentralized organizations.
Alabama’s new law is part of the state’s effort to become more friendly to blockchain and crypto businesses. The Alabama Blockchain Study Commission is pushing to attract innovation and investment in this space. Currently, more than 13,000 DAOs operate worldwide, managing over $24.5 billion in collective funds. Most of these—over 85%—run on Ethereum and its layer-2 networks.
Vitalik Buterin, the Co-Founder of Ethereum, has put forward several proposals to improve DAO governance, including a dual-layer governance structure that separates execution from value judgment and, more recently, a framework using personal AI agents to vote on behalf of members—aimed at boosting participation and reducing the outsized influence of large token holders. Laws like Alabama’s, which provide clear regulations, are seen as beneficial for the operation and growth of DAOs.
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