Why DAO Mergers and Acquisitions Are Legally Impossible (For Now)

DAOs lack legal personhood. A traditional M&A requires a legally recognized entity to execute contracts, hold assets, and assume liabilities. Most DAOs, from MakerDAO to Uniswap Governance, operate as unincorporated associations, existing only as code and social consensus.

On-chain sovereignty creates off-chain liability. A DAO's treasury, managed by Gnosis Safe or a custom multisig, is a target, but the legal liability for its actions rests ambiguously with tokenholders or core contributors. This legal ambiguity makes traditional asset purchase agreements impossible to enforce against a diffuse, pseudonymous collective.

Evidence: The attempted acquisition of Nouns DAO's treasury by a venture firm failed precisely on these grounds; there was no single legal signatory with clear authority to bind the DAO, exposing the fundamental mismatch between Web2 M&A playbooks and on-chain organizational structures.

DAOs lack legal personhood. A Delaware LLC or a Swiss Verein is a recognized legal entity; a DAO is a smart contract and a chat group. This means it cannot hold title to off-chain assets, sign a binding purchase agreement, or be a party in court.

On-chain ownership is insufficient. While a DAO's treasury exists in a multi-sig like Safe or is governed by Compound's Governor Bravo, this only controls digital assets. Acquiring another project's IP, real estate, or corporate subsidiary requires a legal entity to receive the transfer.

Token voting is not a signature. The governance mechanisms of Aave or Uniswap produce on-chain state changes, not legally enforceable commitments. A merger requires a signatory with legal standing, which a Snapshot vote cannot provide.

Evidence: The attempted acquisition of BadgerDAO's front-end by Kraken stalled because Badger, as a pure DAO, had no legal entity to sell. The deal required creating a wrapper corporation post-hoc, adding complexity and delay.

Token swaps are not mergers. A treasury swap between MakerDAO and Aave creates shared economic interest but zero legal integration. The resulting entity lacks a legal identity to own IP, sign contracts, or assume liability, making it a governance cartel, not a corporation.

Governance is not ownership. Controlling 51% of a DAO's tokens via a swap grants proposal power, not legal title to assets. The target DAO's multi-sig signers retain ultimate control over its off-chain treasury and legal wrappers, creating an unresolvable power struggle.

Evidence: The attempted Fei Protocol and Rari Capital merger failed post-token-merge because the Fuse protocol's legal entity and IP remained under Rari's independent control, demonstrating the chasm between on-chain votes and enforceable corporate action.

No Recognized Legal Personhood: A DAO is not a legal entity. It cannot sign a contract, hold assets in its own name, or be sued. This legal void prevents the execution of a traditional merger agreement, as there is no party to bind to the deal's terms.

Asset Transfer is a Nightmare: A DAO's treasury is a multi-signature wallet or smart contract. Transferring control requires a governance vote, but the on-chain governance process lacks the legal finality and fiduciary duty enforcement of a corporate board resolution, exposing all parties to post-deal disputes.

Liability Cannot Be Isolated: In a corporate acquisition, the buyer assumes defined liabilities. A DAO's permissionless membership and pseudonymous contributors create an unquantifiable liability tail. No acquirer can perform due diligence on unknown, globally dispersed participants.

Evidence: The attempted merger between Fei Protocol and Rari Capital collapsed in 2022. Despite passing governance votes, the lack of legal structure to formalize the union and manage combined treasury assets led to its failure, highlighting this fundamental flaw.

DAO M&A is legally impossible because no entity exists to sign a contract. A DAO is a smart contract and a token-holder set, not a recognized legal person. This creates a liability black hole that no acquirer or counterparty will accept.

Tokenholder votes are not binding in a court of law. A successful Snapshot poll to 'sell' a protocol like Uniswap or Compound lacks the legal force of a corporate board resolution. The on-chain/off-chain gap remains unbridgeable without new legal primitives.

The only viable path is asset acquisition, not entity merger. A buyer like Jump Crypto or a16z purchases the treasury assets and IP, leaving the hollow DAO structure behind. This is a workaround, not a true M&A event.

Evidence: The attempted merger between Fei Protocol and Rari Capital collapsed in 2022. The complex, multi-step merger via token swap and governance unification failed, highlighting the insurmountable legal friction even for well-intentioned, aligned communities.