DAO Legal Status Gains Ground in the U.S. Following New State Approval

U.S. DAO adoption expands as Alabama grants legal status and liability protections to decentralized nonprofit entities.

The US state of Alabama has signed a new bill that introduces a structure for decentralized nonprofit groups operating with smart contracts. Lawmakers aim to give clarity to organizations that function without traditional management. The move also places Alabama among a small group of U.S. states adapting laws to emerging crypto governance models.

Alabama Approves DAO-Like Entities With Liability Protections Under SB 277

Alabama has officially recognized blockchain-based nonprofit organizations, giving them a legal footing. Governor Kay Ivey signed SB 277 into law, formally recognizing decentralized unincorporated nonprofit associations (DUNAs). 

Through this legislation, the state establishes a legal framework for groups that rely on blockchain systems and automated governance tools. Authored by Senator Lance Bell, the bill defines a DUNA as an organization with at least 100 members joined by mutual agreement. 

In addition, these entities can own property and engage in revenue-generating activities. However, profits cannot be distributed to members, preserving their nonprofit status.

Liability protections form a key part of the law. As outlined in the bill, members are generally shielded from personal responsibility for the association’s obligations. This provision addresses a long-standing concern for participants in decentralized organizations operating without clear legal backing.

The law is set to take effect on October 1, 2026. Once active, it will provide a formal pathway for blockchain-native communities to operate within state law.

Wyoming Pioneers DAO Legal Status as U.S. Policy Momentum Builds

Signing the bill, Alabama becomes the second U.S. state to grant legal recognition to DAO-like entities. Wyoming set the precedent in 2024 when Governor Mark Gordon approved similar legislation. The state had already approved the first legally recognized DAO in 2021, putting it ahead in terms of early adoption.

Industry participants view Alabama’s decision as part of a broader shift in U.S. policy. Miles Jennings of a16z Crypto described the law as timely, noting it gives decentralized groups the ability to build and contract with greater certainty. He added that clear domestic frameworks are becoming more relevant as federal crypto legislation progresses.

Growth in decentralized organizations adds context to the bill’s significance. More than 13,000 DAOs operate globally, managing over $24.5 billion in treasury assets as of 2025. Average treasury size stands near $1.2 million, with networks tied to Ethereum and its layer-2 ecosystems hosting the majority of these organizations.

The post DAO Legal Status Gains Ground in the U.S. Following New State Approval appeared first on Live Bitcoin News.