Alabama has approved Senate Bill 277, becoming the second U.S. state to establish a dedicated legal framework for decentralized autonomous organizations, or DAOs. The legislation creates a structure for decentralized unincorporated nonprofit associations (DUNAs), giving qualifying groups a recognized legal form without forcing them into a traditional corporate model.
Legal status for qualifying DAOs
Under the new framework, eligible DUNAs can hold property, enter into contracts, and participate in legal proceedings as separate legal entities. This is a notable step for DAOs seeking to connect on-chain governance with off-chain legal and commercial activity.
The bill also states that members are not personally liable for the organization’s obligations solely because of their membership. That provision helps define the legal boundaries for participants and may reduce uncertainty for those involved in governance.
Nonprofit focus and membership threshold
The law does not apply to every DAO. Its scope is limited to organizations with a nonprofit purpose and at least 100 members. As a result, smaller communities and profit-oriented DAO structures may not fall within this framework.
On governance, the legislation explicitly allows the use of smart contracts and distributed ledger tools, giving legal recognition to blockchain-based coordination mechanisms already used by many decentralized groups.
Part of a broader state-level trend
Although approved, the law will not take effect until October 1, 2026. Alabama follows Wyoming, which implemented a similar DAO-related law in 2024. The move highlights a growing trend among U.S. states to give DAOs a clearer legal identity while avoiding a one-size-fits-all corporate structure.
For the crypto sector, such legislation may improve certainty around compliance, asset ownership, and external partnerships. At the same time, the practical impact of the Alabama framework will depend on how these rules are adopted and used after they come into force.