Why do so many crypto projects use a Cayman foundation company?

The problem: a DAO is not a legal person

A DAO, or decentralised autonomous organisation, is a group that makes decisions through votes by holders of its token. In the Lido case below, a US court described Lido DAO this way, as alleged in the complaint: token holders have voting power in proportion to their tokens, and Lido has "no formal corporate structure or centralized leadership".³

Ogier, a law firm, says a DAO needs a legal personality to do some basic things.²

• Enter into contracts, especially with crypto exchanges.²
• Protect its intellectual property from being copied by other projects.²

Without one, Ogier wrote in 2020, the developers can end up acting for the DAO themselves, and so can be personally exposed to liability.⁴

Walkers, another law firm, points to a second problem. Traditional company structures need a shareholder or member, which means an owner. Walkers says a foundation company solves this, because it can be set up with no members and be governed by the DAO.¹ The Act allows this: a foundation company may stop having members if its memorandum allows it and it keeps at least one supervisor.⁵

A court case that worried DAOs

In November 2024, a US federal court in California ruled on a lawsuit against Lido DAO, which, as alleged in the complaint, has no formal corporate structure.³

• The judge found that the investor suing had adequately alleged that Lido DAO is a general partnership under California law. In a general partnership, the partners can be personally liable.³
• He found the same for three of four large investment firms named as members. He dismissed the claim against the fourth.³
• He described a DAO as a type of organisation that "seems designed, at least in part, to avoid legal liability for its activities".³

This was an early ruling. The court had to assume the facts in the complaint were true, so it did not decide that anyone is liable.³ As of October 2026 the case had not ended. In September 2025 the judge refused the three remaining investment firms' request to send the claims to arbitration. They appealed to the US Court of Appeals for the Ninth Circuit, and the case was paused while the appeal is pending.⁶ Briefing finished in August 2026.⁷

Walkers said in November 2024 that the ruling highlights the liability risks for people taking part in "unwrapped" DAOs, meaning DAOs with no legal entity.⁸

What the "wrapper" offers

Walkers says that "wrapping" a DAO means forming a legal entity, such as a foundation company, to act as the DAO's formal legal representative or operating body.⁸ It lists these reasons for using a foundation company.¹

• A legal person. It can own assets, sign contracts, and sue or be sued.¹
• No owner. It can have no members and be governed by the DAO.¹
• Limited liability. It is intended to protect DAO members from personal liability for the DAO's obligations, but this is untested in the Cayman courts.¹
• A purpose. It can be set up for DAO governance, managing a treasury, running grants and maintaining a protocol.¹

In place of members, a supervisor can watch over the directors. Ogier describes a supervisor as a "steward" with no ownership or economic entitlement in the company.²

Ogier also wrote in 2020 that a foundation company can name its beneficiaries as a class, such as "tokenholders", rather than as named people.⁴ Under the Act, those beneficiaries have no rights unless the constitution gives them some.⁹

Tax

Conyers, another law firm, says Cayman has no corporation tax, income tax or capital gains tax for a company doing business offshore.¹⁰ Ogier says a foundation company whose objects are mainly outside Cayman may be formed as an exempted company, and that exempted companies pay no Cayman income, withholding or capital gains taxes.¹¹ Ogier also points to Cayman's "tax neutrality".²

Conyers also advises clients to consider what setting up a Cayman foundation company means in their home country.¹²

How common are they?

Walkers calls the foundation company the "premier vehicle of choice" for wrapping a DAO.¹ Ogier calls Cayman one of the world's most popular places to set up legal structures for DAOs.² These are the firms' own views. Conyers, a third firm, lists "a legal wrapper for decentralised autonomous organisations" among the planning uses of a foundation company.^1,2,12

The General Registry publishes how many companies of each type are registered. On 22 October 2026, its table showed 296 foundation companies registered so far in 2026, against 9,237 exempted companies.¹³

One well-known example is the Arbitrum Foundation. Its own documents describe it as a Cayman Islands foundation company. They say the ArbitrumDAO can elect or remove its directors.¹⁴ Naming it here is an example, not an endorsement.¹⁴