Structuring DAOs: Wrappers, Jurisdictions, and the Fight for Legal Recognition with James Kingston

Sanad Karkar
Sep 30
3 min read

From Discord chats to billion-dollar treasuries, DAOs have evolved into one of Web3’s most fascinating experiments. Yet behind the hype lies a critical question: how do you structure a DAO so it survives outside of Telegram threads and voting forums?

In this MoonCast episode, LPO&Law’s Sanad Karkar and Razin Nizar sit down with James Kingston, founder of DAO SPV, to unpack how wrappers, foundations, and cross-border compliance can make, or break, a DAO’s future.

A little teaser from the episode, see it in full here.

From Isle of Man to Web3: James Kingston’s Journey

James Kingston didn’t set out to become a DAO structuring expert. Growing up in the Isle of Man, his family business was traditional corporate structuring. After Oxford and the English Bar, James went deep into tech before realizing the Web3 space needed the same thing his family built for decades: legal infrastructure for innovation.

At DAO SPV, James now advises founders across 13 jurisdictions, helping them turn decentralized experiments into bankable, compliant organizations.

What is a DAO, Really?

DAOs (Decentralized Autonomous Organizations) are blockchain-based communities governed by smart contracts rather than boards or CEOs. Members pool resources, make decisions through token-based voting, and aim to democratize collaboration.

But while the code is borderless, regulators are not. Without proper wrappers, DAOs risk being treated as unincorporated associations—leaving token holders personally liable.

Why Wrappers Matter

James highlights the two biggest benefits of DAO wrappers and SPVs:

Legal personality: So DAOs can interact with the “real world” (sign contracts, raise funds, open accounts).
Limited liability: So contributors and token holders don’t risk personal assets if something goes wrong.

This distinction matters. The Ooki DAO case in the U.S. showed what happens when courts pierce the DAO veil: members who voted on proposals were deemed jointly liable, facing penalties and injunctions.

Jurisdictions in the Spotlight

Not all wrappers are created equal. Some are heavyweight foundations, others nimble LLCs. James uses a gladiator analogy:

Cayman Islands Foundations = the armored gladiator (expensive, heavyweight, flexible bylaws).
Marshall Islands LLCs = the nimble fighter (light, adaptable, innovative).
Wyoming DAO LLCs = U.S.-centric, but their recognition outside Wyoming remains uncertain.

Small jurisdictions, especially islands, are competing fiercely for DAO business, just as they once did for trusts and funds.

Tax Neutrality vs. Tax Avoidance

One of the trickiest areas for DAOs is taxation. Offshore foundations often promote “tax neutrality”, but major economies treat them differently under Controlled Foreign Corporation (CFC) rules.

EU / OECD (ATAD Directive): CFC rules trigger if profits sit in low-tax jurisdictions.
U.S. (Subpart F & GILTI): Shareholders taxed on undistributed CFC income.
Canada (FAPI rules): Passive income in foreign subs taxed as domestic income.

As Sanad notes in the episode, simply setting up offshore doesn’t erase tax liability. In the U.S., EU, and UK, substance and control tests determine where profits are taxed.

The U.S. Problem: Too Many Cops on the Beat

Unlike Europe, the U.S. has no unified crypto regulator. Instead, SEC vs. CFTC turf wars create uncertainty over whether tokens are securities or commodities. Add in FinCEN, OCC, state regulators, and you have a compliance minefield for DAOs and VASPs (Virtual Asset Service Providers).

This patchwork leaves DAO founders exposed—sometimes to multiple regulators at once.

Lessons for DAO Founders

So, where does this leave founders and investors? James and the MoonCast team distill it down:

Get wrapped early. Liability is real, don’t assume decentralization protects you.
Choose your jurisdiction strategically. Not just for tax, but for investor confidence and banking access.
Stay compliant across borders. CFC rules and regulatory overlaps can pull you into unexpected tax or legal exposure.
Think beyond hype. DAO wrappers, SPVs, and foundations may sound boring, but they’re the infrastructure that enables real-world adoption.

Final Thoughts

DAOs aren’t just about radical transparency or token-based voting—they’re about building sustainable, compliant communities. Wrappers and entity stacks turn radical ideas into structures that banks, regulators, and investors can understand.

As James Kingston puts it: