Ooki DAO is currently facing the force of the futures trading watchdog. The CFTC filed a lawsuit against the platform for offering services outside its authority.
The Commodity Futures Trading Commission stated that Ooki DAO offered digital asset margin trading, which they’re not permitted by law to do. This service is usually handled by only Futures Commission Merchants registered with CFTC.
The commission also alleged that the trading and lending platform didn’t enforce the KYC requirements under the Bank Secrecy Act.
According to records, this action is the first time a DAO has faced a lawsuit from the Commodity Futures Trading Commission.
CFTC And Ooki DAO Lawsuit
The charges of CFTC against Ooki DAO are numerous. Now, the commission pushes for restitutions, trading and registration bans, and disgorgement. Also, the CTFC is pushing for civil monetary penalties and injunctions against any other violations of the CFTC and CEA regulations. The CFTC made its stance in a statement on September 22.
Besides this issue with Ooki DAO, CFTC had pressed the exact charges on bZeroX. The platform was the predecessor of Ooki DAO. In that case, the commission reached a deal with the platform and its founders, Kyle Kistner and Tom Bean.
The settlement was up to $250,000. But now, the CFTC believes that Ooki is using its structure to avoid regulation. bZerox had transferred its bZx protocol (Ooki protocol) to bZx DAO (Ooki DAO)
According to CFTC, these moves were made to avoid Acts and Regulations and other laws without facing the consequences.
CFTC Actions And Effects
According to the CFTC Enforcement Director, Gretchen, these actions by the commission aimed to protect the customers in the United States.
The commission believes that every leverage or margined trading on these platforms for retail customers in the country should be legit. These operations must occur on only exchanges that have duly registered and operate in compliance with regulations and other applicable laws. Moreover, all entities, whether DAOs or traditional businesses, must meet these requirements.
But Commissioner Summer Mersinger made a statement against the action stating that it is not right to arbitrarily decide those violating the laws based on unsubstantiated legal theory.
Also, going by DeFi’s basic principles, the CFTC is countering what the sector supports. CFTC points out that DAOs are the same as traditionally regulated institutions and must face enforcement if they violate the law.
But Vitalik Buterin, the co-founder of Ethereum, shared his thoughts on the issue in a Monday blog.
Buterin stated that DAOs shouldn’t be compared to traditional corporations arguing that DAOs are better at serving the market needs. According to Buterin, DAOs make better decisions through voting with smart contracts and also run fair systems.
Featured image from Pixabay, chart from TradingView.com