Uniswap Foundation Proposes New Legal Framework

The Uniswap Foundation, responsible for the world's largest decentralized spot crypto exchange, has proposed establishing a new legal entity under Wyoming's Decentralized Unincorporated Nonprofit Association (DUNA) framework, referred to as "DUNI." This initiative aims to maintain the governance structure of Uniswap's DAO while providing a legal foundation for operational activities, including retaining service providers, entering contracts, and fulfilling regulatory and tax compliance requirements. With this proposal, the Foundation will allocate $16.5 million in UNI tokens to cover past tax obligations and create a legal defense budget. Historically, Uniswap chose not to be classified as a corporation for tax purposes, expecting an IRS bill of less than $10 million to settle previous tax liabilities and potential penalties. The Foundation's announcement emphasized that adopting the DUNA framework would also facilitate the activation of protocol fees, allowing a portion of liquidity provider fees to be directed into the DAO treasury. Uniswap Foundation's general counsel, Brian Nistler, highlighted that this legal structure significantly enhances the DAO's capabilities, paving the way for future discussions on implementing a fee switch. However, Nistler clarified that under the DUNA framework, fee revenue cannot be directly distributed to UNI token holders, reaffirming that the decentralization of Uniswap governance remains intact. He added, "While we are adopting this legal framework, it doesn’t really change the decentralization of Uniswap governance or the DAO." In addition, $75,000 will be allocated to Cowrie, an advisory firm co-founded by David Kerr, to administer DUNI. Kerr played a crucial role in drafting the Wyoming statute, which was passed in March 2024. Nistler praised him as a valuable advisor throughout the DUNA evaluation process. This proposal surfaces as various crypto protocols are contemplating re-centralizing certain functions for efficiency, a trend exemplified by the LayerZero Foundation's proposition to acquire the Stargate bridge and Yuga Labs' proposal to dissolve its ApeCoin DAO. Nistler remarked that the key transformation in the industry lies not just in updating operations on-chain, but truly reinventing decision-making processes. "DAOs have lagged behind in this area, but the DUNA entity presents a pathway for DAOs to elevate their operations," he concluded, reinforcing the importance of collective agency in shaping their futures.