California Bill Would Create Decentralized Nonprofit Association Law

As discussed in this recent post, Judge Larry Alan Burns recently ruled that the plaintiffs in class action had adequately pled that a distributed autonomous organization (DAO) was a partnership under California law.  Sarcuni v. bZX DAO, 2023 WL 2657633.  In a prior ruling, Judge  William H. Orrick ruled that a DAO may be sued as an unincorporated association under California law.  Commodity Futures Trading Comm'n v. Ooki DAO, 2022 WL 17822445.  Now, the California legislature is wading into the issue and proposing to create a decentralized nonprofit association law.

AB 1229 (Haney) would define a "decentralized nonprofit association" as an "unincorporated association consisting of at least 100 members with a primary common purpose other than to operate a business for profit whose governance and operations are reliant, in full or in part, on a blockchain or other distributed ledger technology".  Although a decentralized nonprofit association's primary purpose may not be to operate a business, the bill would allow it to "carry on a business for profit and apply the profit that results from the business activity to an activity in which it may lawfully engage".  Compare Cal. Corp. Code § 18020.  

What is oddly missing from the proposed law is any requirement of a nexus to California.  The law does not provide for the chartering of decentralized nonprofit associations as no filing is required with the Secretary of State or any other state agency.   The law does specify that in addition to establishing venue under any legally recognized method, venue of an action against a decentralized nonprofit association may be brought in the county where it has appointed an agent for service of process.  However, venue is not the same as jurisdiction or a choice of forum or law.