What Are the Key Regulatory Challenges for DAOs Operating in the Financial Derivatives Space?

The main challenge is determining legal jurisdiction and liability, as DAOs lack a clear legal entity and operate globally. Regulators struggle to identify who is responsible for compliance with derivatives laws, such as KYC/AML requirements and consumer protection rules.

The decentralized nature clashes with traditional financial oversight structures. Additionally, classifying governance tokens as securities or commodities creates legal uncertainty.

This regulatory ambiguity severely limits institutional adoption of DAO-based derivatives.