MakerDAO Earmarks $5M For Legal Defense

Governance vote creates defense fund intending to alleviate costs for Maker participants exposed to “novel legal risks”


Source: Shutterstock / CryptoFX, modified by Blockworks


MakerDAO governance has approved a new multi-million fund aimed at reimbursing certain individuals’ legal expenses.

The Defense Fund, consisting of 5 million dai (DAI) — Maker’s US dollar-pegged stablecoin — is intended to fund costs incurred from legal and regulatory bouts, the DAO said in a tweet on Wednesday.

Direct funding will only be provided for select Maker participants including recognized delegates, core unit facilitators, core unit permanent contributors and active MKR holders. 

A ratification poll, initially proposed early last month, approved the fund following a governance vote on Wednesday, with 72% of participants in favor of the move.

On paper, the budget appears to offer significant financial assistance to those locked in legal disputes. Though, according to data provided by legal services marketplace ContractsCounsel, typical attorney fees across 50 US states range from between $100 an hour to $400 an hour.

Based on the median cost for an attorney, around $350 an hour, legal fees could chew up significant portions of the fund in short order in the event multiple legal cases arise.

It is unclear whether the contingency budget of 5 million DAI is expected to grow over time. Maker did not immediately respond to a request for comment.

For now, Maker is concerned with laying the foundation for the fund, including how lump sum payments are expected to be delivered.

The organization has tapped insurance and risk management firms Gallagher and Artex to develop a claims procedure manual following a feasibility study on the average legal defense costs.

All claims and payouts will be handled by an “external technical committee” composed of insurance and risk management experts, Maker said. The committee will then issue a recommendation to approve or reject a payout based on a claim.

Self-insurance is a well-known risk management technique comprising setting funds aside to cover a possible future cost, Maker said in an original proposal laid out late last year.

Unlike Wyoming, which recognizes decentralized autonomous organizations (DAOs) in the same capacity as LLCs, most other US states and the wider world do not. That presents legal headaches for participants operating within the freshly conceived organizational construct.

“DAOs are novel organizational structures and, as such, may expose their participants to novel legal risks,” the organization said. “MakerDAO is not a legal subject, hence is unable to limit liability risks for its participants.”

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png


Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.


After accelerating conversations with issuers, the SEC took a step toward allowing ETH funds to launch


As FIT21 advances to the Senate, experts are cautiously optimistic but say to expect some changes to the bill


Three Democrats joined Republicans Thursday in supporting a bill that would block the Federal Reserve from issuing a retail CBDC


Plus, Zeta Markets has released a litepaper for the “Zeta X” layer-2 it’s hoping to send to mainnet in early 2025


From CME Group’s launch of ether futures to congressmen urging the SEC to approve spot funds, a lot has led up the agency’s decision



As part of the #Breakout2024 plans, Radix has introduced Token Trek