1. The Strategy: A Hybrid Approach
We use a “hybrid jurisdictional” approach. This creates a legal and operational separation between governance (deciding what happens) and execution (making it happen).- Governance Layer: Domiciled in the Republic of the Marshall Islands (RMI) to leverage their specific recognition of DAOs.
- Execution & Interface Layer: Domiciled in Panama and the Cayman Islands to manage regulatory profiles for custody and frontend interfaces.
2. Governance Domicile: The Marshall Islands (RMI)
We chose the RMI because of their Decentralized Autonomous Organization Act of 2022. Unlike most jurisdictions, the RMI explicitly recognizes DAOs as corporate entities.Why Corporate Personhood Matters
- Legal Standing: Under the RMI DAO Act, our DAO LLC has full corporate personhood. It can sue, be sued, hold assets, and sign contracts.
- Liability Protection: This creates a “corporate veil.” Without this, a DAO could be treated as a general partnership (like in CFTC v. Ooki DAO), where individual token holders could be personally liable for the DAO’s debts. Here, your liability is limited to your capital contribution.
The “Master-Series” Architecture
To launch 1,000+ index tokens without forming 1,000+ new companies, we use a Master-Series LLC structure.- The Master Entity: The “IndexMaker Master DAO LLC” is the umbrella. It holds the core IP, governs the election process, and manages service providers.
- The Series Entities: Each index token (e.g., “Index A”) is a separate “Series” within the Master LLC.
- Firewalled Liability: If “Index A” gets exploited or liquidated, the liability stops there. Creditors cannot seize assets from “Index B” or the Master LLC.
- Scalability: We can launch a new Series via a smart contract interaction and an amendment to the Operating Agreement, without filing new paperwork for every single index.
3. Operations: The Panama Nexus
While RMI handles governance, it doesn’t currently have a license framework for active custody. We use Panama entities for the “heavy lifting.”The Authorized Participant (AP)
The AP is a distinct Panama entity. It acts as the bridge between the on-chain protocol and the off-chain financial world.- Function: It holds accounts with centralized exchanges (like Binance or Bitget) and executes trades as directed by the protocol.
- Liability Buffer: By putting custody in a separate entity (a subsidiary of IndexMaker Labs), the DAO itself never takes possession of user assets.
- Safety: The AP is a separate corporate person. Its relationship with the DAO is strictly contractual.
The GUI Operator (The Interface)
To protect the protocol developers, the website (indexmaker.io) is operated by a separate Panama corporation.- Structure: This entity is owned by a Cayman Foundation (an “ownerless” vehicle).
- The “Uniswap Defense”: This separates the core developers from the website. We maintain that the GUI is just a passive tool reading public blockchain data, distinct from the protocol itself.
4. Addressing U.S. Securities Laws
Our legal imperative is ensuring IndexMaker tokens and governance units are not classified as “investment contracts” under the Howey Test. We focus specifically on neutralizing the fourth prong of Howey: reliance on the “efforts of others.”The “Hinman Doctrine”
We aim for “Sufficient Decentralization.” If the network is decentralized enough, purchasers aren’t relying on a specific group (like a Promoter) for profit. We achieve this by distributing:- Governance Power: To the General Assembly.
- Execution Power: To the Issuer Network.
The Williamson v. Tucker Analysis
We stress-test our decentralization against the three Williamson factors: 1. Is power distributed?- Yes. The General Assembly has “Real Governance Power.” It’s not symbolic; you have binding authority to set parameters and elect the Issuer Network.
- No. The supervisory “Elected DAO” is chosen from an Eligibility Pool. You must pass governance/compliance training and prove domain skills to get in. Decisions are made by sophisticated actors, not passive investors.
- No. We use Sortition (random selection) for the Elected DAO. If managers are picked by lottery from a qualified pool, no single individual is “unique.” The protocol runs on a network, not on a single server controlled by the founders.
5. Corporate Hierarchy Overview
Here is how the entities connect:- Marshall Islands Master DAO LLC (The Master):
- Role: Supreme governing body. Holds admin keys.
- Owner: Token holders (Member-managed).
- Role: Supreme governing body. Holds admin keys.
- The Series (Series A, B, etc.):
- Role: Isolates assets and liabilities for each specific Index Token.
- IndexMaker Labs:
- Role: Software development company. Licenses code to the DAO via a “Software Support Agreement.”
- Panama Authorized Participant:
- Role: executes trades and holds exchange accounts. Contracted via “Crypto Asset Services Agreement.”
- Panama GUI Operator:
- Role: Runs the website. Owned by a Cayman Foundation to ensure “orphan” status.
6. Risk Disclosures
We value transparency. Here are the specific legal and operational risks:- Regulatory Enforcement: While we use the “DeFi Exception,” regulators (like the SEC) may disagree. If they view our “Eligibility Pool” as founder-controlled or our Sortition as a sham, they could classify tokens as securities.
- Operational Centralization: In the early “Guided Operations” phase, the founders have more influence. This creates a temporary period of higher regulatory risk until we transition to “Full Sortition.”
- Smart Contract Risk: The legal separation of the “Series” relies on the technical separation of assets. A smart contract bug that allows cross-contamination of funds could lead a court to ignore our legal liability firewalls.