POLKADOT.LAW – A Polkadot DAO Research under US Law

[wariomx]

gm Polkadot Community!

I have a potential treasury proposal and I would love to receive some feedback first.

Thanks.

Proposer:
SOFTLAW S.A. DE C.V.
A legaltech company focused on the evolution of the Law.

Github: soft.law · GitHub

Problem Statement:
The Polkadot ecosystem is growing and currently lacks a formal presence in the United States, weakening both its credibility and capacity to scale public goods and services.

This legal deficiency constrains a) DAO agents and bounties to enter into enforceable agreements with Banks, Corporations, Institutions, and Governments. b) Formal Recognition of Treasury Proposals as enforceable contracts.

Proposal Summary:
This proposal seeks funding to conduct a 6-month research and development of the initial phase of Polkadot.law, which includes a) Polkadot DAO Governance System Research under US Law; b) Engagement with Ecosystem Agents, c) Landing Page Development.

Polkadot.law will serve as a neutral, public good.

The research will attend 3 main topics:

1. Legal Analysis of DAO Structures: Examination of legal entities available under U.S. law that could be used to incorporate the Polkadot DAO.

2. Recognition of Treasury Proposals as Legal Agreements: Legal assessment of treasury proposals as enforceable contracts. This includes the potential incorporation of Alternative Dispute Resolution (ADR) mechanisms, such as ICC arbitration clauses, and a legal framework to address cases where treasury-funded deliverables are not fulfilled.

3. Commercial Use Cases and Contract Drafting: Legal analysis of three core commercial activities (KOL & Marketing Services Agreement, IRL Events Services Agreement, Software Development Agreement) within the Polkadot ecosystem and delivery of three contract templates under international private law.

The principal objective is to articulate a legal strategy for protecting public goods within the Polkadot ecosystem and ensuring referenda and treasury actions can be treated, where appropriate, as legally binding agreements.

Deliverables:

1. Analysis of the Polkadot DAO under US Law.
2. Landing Page for Polkadot.law

Publication and Licensing:
The final report will be published under an open license and made available through: The domain www.polkadot.law and as a public comment in the respective on-chain referenda discussion

Optional Follow-up (Not included in this proposal):

• A DAO incorporation framework and internal governance design.
• A legal documentation toolkit and interactive legal resource hub.
• Tax Analysis.
• Legaltech Dapp.

These potential future efforts will be pursued only upon further consultation with the community and the evaluation of the present report.

Timeline
The work will be structured over a total period of six months.

Alignment with the Polkadot Ecosystem
This proposal supports the Polkadot ecosystem’s commitment to decentralized governance, public goods funding, and neutrality.

Budget
$50,000

Contact:
wario@soft.law
@wario_mx:matrix.org

[Nukeme3]

I would like to see more specifics on who would be selected to provide legal guidance and clarity. Specifically, is there a registered law firm (preferably within the US) that would be able to confirm the results of this research?

I’m not intimently aware of how SoftLaw operates, but according the business plan linked in the GitHub repo (W3F_Grant/business_plan.pdf at 4ed3e0082e9a9f72d4a55a1ed8e28b318329d87e · soft-law/W3F_Grant · GitHub) on page 8 states “An AI-powered legal assistant acts as a digital lawyer, providing expert guidance and ensuring compliance with international intellectual property regulations… functioning as both a legal advisor and a technical engineer.”

If this is the case, that an AI agent will process the legalities of the study, I would still expect the output to be formally reviewed by an actual lawyer or team of lawyers. This way, there is still traditional ‘real’ support and fallback if a DAO, team, or individual chooses to make actions based on the findings of this research.

[wariomx]

Excellent question,

The project that you are referring is the main focus of softlaw, currently working by myself landing all the ideas, and solidity code (business logic- to tokenize copyrights) - milestone 2 - currently as an alternative branch.

This proposal is focused on Polkadot.law, at the moment I am in contact with the researcher graduated from one of the best universities of the world. (still closing the deal)

[cesarMx]

Full support for this initiative. We need to stop being “crypto dreamers” and become people who can sit down with banks, governments, or companies and negotiate on equal footing, without fear of ending up in legal limbo.

[wariomx]

Adding this screenshot from a related discussion in another public forum to provide more context:

Subsquare Link

[alice_und_bob]

suggest to split the projects up. the three pillars are somewhat disconnected

[wariomx]

You’re right, it’s better to limit the scope. Based on internal discussions and community feedback, we’ve decided to remove point 3 entirely and narrow the focus of point 2.

The main challenge we’re trying to address is how the Polkadot community can make treasury proposals legally enforceable. Achieving this requires two things:

• A legal entity or representative structure (e.g., a U.S. wrapper) - this is now the revised point 1.
• A clear contractual framework - revised point 2. The new point 2 will be limited to researching how treasury proposals can be recognized as formal contracts, with specific recommendations for incorporating dispute resolution clauses.

What we’ve removed is the part that proposed building a full legal framework for handling contract breaches or implementing the ADR (Alternative Dispute Resolution) process itself - that will not be part of this initial phase.

We’re still evaluating whether points 1 and 2 should be further split into separate research tracks.

The main counterargument we’ve heard - and we agree with - is that the original scope was too broad. Each pillar could become a standalone research project.

IMO, both topics (DAO structure and enforceability of proposals) are essential. But I fully understand the team’s concerns, which align with your suggestion.

[Mork]

Heya @wariomx

My feedback in a nutshell is this:
This is a rabbithole, which will result, at best, in trivial results. You would be best advised to drop it before you get attached to the idea.

That said, please do go ahead and research, particularly 1. (DAO structures (and their enforceability)), but please don’t seek funding for it as research starting from this basic level is not going to be helpful for Polkadot, and research at a deeper level is a) a rabbithole and b) best started by an entity that already has significant experience - it’s not something one can just commission in, because the questions you ask are not going to be the salient ones, and this is a very expensive way to learn that lesson.

I know this answer won’t satisfy you, so let me offer just a few, off-the-top of my head criticisms of the concept. There are more detailed problems but, as I say, it is a rabbithole you don’t want to get into.

1. Polkadot DAO already has a legal entity.
   Even if there were advantages in adding a US entity, adding another jurisdiction to the mix complexifies the legal situation exponentially. Rabbithole. Fees. Uncertainty.

2. There has already been considerable legal advice commissioned by Parity, especially on the question of liability in the US context.
   2a. OpenGov can be seen as partly a response to this advice, as can other structural elements (including the existing Polkadot DAO Caymans entity) already put in place. A legal strategy has been made and is being followed.
   2b. Much of this advice is, anyway,now moot due to the fact that the US is a volatile shithole.
   2c.Even if the US were only as volatile as it historically had been, it is still a smorgasbord of different approaches and jursidictions and any advice we got now would have a very short shelf life.

3. You seem to view the ability to use real world legal contracts as the main advantage behind a US-based Polkadot DAO. But you don’t seem to have recognised how incredibly difficult international contracts are to obtain, or enforce, judgement on..
   3a. The sums involved in legal costs would dwarf all but the largest proposals to ever have passed.
   3b. Many involved in Polkadot are anonymous or pseudonymous and, imho, it is better this way (apart from anything, it encourages us not to rely on naive pre-blockhain concepts of enforcement).
   3c. And even were judgments to be obtained against named individuals or companies, companies can disappear, individuals can jurisdiction hop and hide assets. The whole premise of contracts is two-sided legal enforcement and the idea fails at this hurdle.
   3d. Even on the DAO side, what if a counterparty obtained judgement against the DAO? How to enforce that? Go to OpenGov with a proposal to pay the counterparty’s damages and costs? Are counterparties meant to be inspired with confidence because we have an entity with a legal representative that can sign a contract (but which it is known to all is a mere shell that cannot be coerced)? The lack of a (US) entity is not the problem for ‘Banks, Corporations, etc.’, that’s just their shorthand way of saying they need a collateralised, enforceable-against (and, often, audited) entity. Again, contracts are premised on two-sided enforcement, which is not realistic here.

4. The proposals that we write on OpenGov, which I’m assuming you intend we treat as contracts, are piss-poor legally. Any lawyer trying to enforce on them would demand a moron fee upfront.
   4a. Even million-plus DOT proposals are lacking in crucial specifics of delivery, rarely specify any consequences for non-performance. There is little or nothing to enforce.
   4b. Which means one party or the other can argue lack of legal effect and then, if a case has any chance at all, it’s in the long grass of the law of equity. Millions in fees.
   4c. Even if proposals-as-contracts were somehow properly written, and enforceable, if they are written by proposers, they will still be as one-sided as the bullshit KPIs we have seen in proposals since KPIs became a thing in OpenGov. Proponents will just write them in such a way that they cannot fail, and if any failure is alleged, it will take a whole load of lawyer time to argue. You have, by lucky chance, given three examples famous for either impossible-to-fail terms (KOL ‘services agreements’), wide leeway in caselaw in what constitutes performance (events) and hella-long lawyer time (software services). All of which exemplify the fundamental problem with assuming that even if we could somehow make legal contracts effectively enforceable, that they would be capable of governing our DAO business.

5. ADR? Nice idea, still expensive. And any legal advice we have would have even less relevance as ADR is its own little special world.

Anyhoo…

If this is a subject that interests you, I would suggest you research, on your own account, existing caselaw on DAOs.

Enforceability of proposals is a live issue, one begging for improvement.
Maybe you could come up with a technical ADR-like solution based on legal mechanisms, but operating outside of them, and figure where that could plug in to our governance.
If that were to exist, it is likely to be a simple matter to make a legal wrapper for it, but the reality (technical) needs to come first, before the fiction (law).

[wariomx]

Heya @Mork

I truly appreciate your feedback.

I’ve submitted the proposal for the voting process. Here’s the link, I believe it addresses some of the concerns you raised.

In general I don’t claim to have all the answers, and I fully recognize that this is a complex rabbithole. This referendum doesn’t pretend to solve all the legal issues around the DAO, but it aims to provide academic research that brings clarity and context to some of the key questions, especially around DAO structures and the enforceability of treasury proposals.

Yes, I’m curious, and the topic is interesting, but as any competent lawyer would agree, it’s better to study the case thoroughly before making assumptions or giving advice. And of course, I don’t plan to do this alone. That’s why I’ve assembled a team of capable people who are committed to taking a serious and thoughtful approach.