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News Report

SushiSwap Community Proposes Legal Structure to Reduce Risks

2 mins
Updated by Kyle Baird

In Brief

  • Protocol aiming for a Swiss legal entity.
  • Community reaction has been positive so far .
  • SUSHI token price and TVL still falling.
  • promo

The community behind decentralized exchange SushiSwap has proposed that the decentralized autonomous organization SushiDAO should form an association or foundation in order to mitigate future risks.

The March 20 proposal was posted on the SushiSwap forum under the title “Sushi Legal Structure.” It aims to add a legal layer to the current DAO for current token holders and contributors.

The formation of a foundation or similarly structured organization will provide legal clarity regarding rights and obligations for those involved with the project. Additionally, it would provide limited liability for token holders and create a system to manage administrative issues for the DAO.

Community member ‘Tangle’ who posted the proposal said that there were a number of jurisdictions under consideration for forming a DAO entity, but Switzerland was leading the way due to its favorable  Swiss Association law.

Foundations are the way forward

The SushiSwap ecosystem is currently governed by a DAO like most DeFi projects which keeps it decentralized to an extent. A foundation or association would introduce an official legal element to the organization which may involve some form of centralization. 

It was estimated that a one-time setup cost would be around $85,000 to $100,000 with recurring costs of $10,000. The proposal added that the first steps in its formulation would be determining foundation members, establishing them, working on token distribution and transfer, and drafting association articles.

The reaction was positive with most respondents stating that the protocol is moving in the right direction with this proposal. Community member ‘pegbit’ said, “Sushi is currently at a crossroads, and the path we take from here will determine whether we become a top-tier project or not.” While fellow member ‘hamletmachine’ commented:

“As long as the final legal structure doesn’t force Sushi to move away from offering their services globally to all humans equally. We cannot afford to compromise our core crypto ethos in order to appease increasing global ‘regulatory demands’.”

At the time of writing, there was 100% approval to create a legal entity and engage legal counsel in the “temperature check” phase. If approved, it will be put forward for a formal vote by Sushi governance.

SUSHI Price Outlook

The platform’s native token has not reacted to the proposal having lost 2.2% on the day. SUSHI was trading at $3.26 at the time of press, having lost a little since its weekend and two-week high.

The once darling of the DeFi world has dumped 86% since its all-time high of $23.38 in March 2021. DeFi Llama is currently reporting a total value locked of $3.69 billion for the DEX, a 48% decline from its November all-time high of almost $7 billion.


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