Tokens & Securities Laws

Non-Profit DAO LLC Governance Tokens and any DAO LLC Tokens with No Economic Rights

• The DAO Act states that "all digital assets including non-fungible tokens issued, sold or transferred by a non-profit DAO LLC to its members or in advancing its non-profit purpose shall not be deemed a digital security".

• The DAO Act also states that "a governance token conferring no economic rights shall not be deemed a security".

• These carve-outs can help Non-Profit DAO LLCs or any DAO LLC token with no economic rights get their tokens listed on centralized exchanges, which often ask for a legal opinion on whether the token is a security in the company's local jurisdiction or in other situations where the token's security status in its home jurisdictions is relevant.

Are For-Profit DAO LLC Tokens or Tokens that Confer Economic Rights Securities Under the DAO Act?

• Just because a DAO LLC is for-profit and has tokens that confer economic rights does not automatically make its tokens securities, but the tokens are not automatically considered not securities by the Marshall Islands either.

• Either way, RMI securities laws do not apply to your DAO LLC as long as you are not selling tokens in the Marshall Islands (see below).

Application of Marshall Islands and Other Securities Laws

• The DAO Act states that "To the extent that a DAO LLC is not, directly or indirectly, issuing, selling, exchanging or transferring any digital securities as defined in Section 102 of the Securities and Investment Act to residents of the Republic, the provisions of the Securities and Investment Act shall not apply to DAO LLCs".

• This means that, as long as you do not sell your token to residents of the Marshall Islands, you do not have to follow Marshall Islands securities laws.

• Keep in mind that most countries' securities laws apply to any company domiciled anywhere in the world when it sells in that country. For example, when selling something in the United States that the US considers a security, you have to follow US securities laws.

What Other Marshall Islands Laws Apply to Tokens?

• The only law that mentions tokens other than DAO LLC-related laws does so in the context of VASPs, which are not allowed in the Marshall Islands but are also defined more narrowly than in some other jurisdictions. See more about VASPs here.

• Other than that, DAO LLCs are allowed to launch and use tokens for any otherwise-legal purpose.