How Can a DAO Structure Its Governance to Minimize the Legal Liability of Individual Token Holders?

A DAO can take several steps to minimize participant liability. It can formally incorporate as a legal entity, such as an LLC or a foundation, which provides a corporate shield between the DAO's obligations and the members' personal assets.

Governance can be structured to delegate specific operational and compliance functions to smaller, specialized committees or third-party service providers. Using governance frameworks that emphasize risk assessment and clear, documented decision-making processes can also demonstrate a commitment to responsible management, potentially mitigating claims of negligence against individual token holders.