What Is the Challenge of Enforcing Legal Recourse for a Smart Contract Default?

The main challenge is the lack of legal clarity on the jurisdiction and contractual status of a smart contract. Since the code is the final arbiter of the trade, a default resulting from a code error or exploit may not have a clear legal remedy.

Parties must rely on specific legal wrappers or arbitration clauses that attempt to link the on-chain trade to a traditional legal framework.