Wyoming’s Trailblazing Path in Crypto Legislation: A Comprehensive Guide to Wyoming LLC Crypto Laws and Cases

• Aimone v. Aimone, 2023 WY 43 (Wyo. 2023)

  This case does not appear to be directly relevant to the research request, as it does not mention crypto or LLC laws specifically. However, it does discuss fiduciary duties of LLC managers, which may be useful background information for the research request.

  “Lyman v. Childs, 2023 WY 16, ¶ 10, 524 P.3d 744, 751 (Wyo. 2023) (citing Fuger v. Wagoner, 2020 WY 154, ¶ 8, 478 P.3d 176, 181 (Wyo. 2020)). The district court’s fact findings are presumptively correct, but this Court can review all evidence in the record, giving due regard to the district court’s credibility determinations and weighing of evidence. Id. Findings of fact will only be set aside if, although evidence to support such findings is present, the entirety of the evidence leaves this Court with the firm conviction a mistake was made.”

  “Trust interpretation is a matter of law we review de novo. Gowdy v. Cook, 2020 WY 3, ¶ 39, 455 P.3d 1201, 1210 (Wyo. 2020) (citing Shriners Hosps. for Child. v. First N. Bank of Wyo., 2016 WY 51, ¶ 40, 373 P.3d 392, 405-06 (Wyo. 2016)).”

• Kaycee Land and Livestock v. Flahive, 2002 WY 73 (Wyo. 2002)

  This case is relevant to the research request because it discusses the circumstances under which a court may “pierce the veil” of a Wyoming LLC and hold its members personally liable. However, the case does not specifically mention crypto laws, so it is only partially relevant.

  We provided the following factors to be considered in determining whether a corporate entity may be disregarded: “`Among the possible factors pertinent to the trial court’s determination are: commingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses; the treatment by an individual of the assets of the corporation as his own; the failure to obtain authority to issue or subscribe to stock; the holding out by an individual that he is personally liable for the debts of the corporation; the failure to maintain minutes or adequate corporate records and the confusion of the records of the separate entities; the identical equitable ownership in the two entities; the identification of the equitable owners thereof with the domination and control of the two entities; identification of the directors and officers of the two entities in the responsible supervision and management; the failure to adequately capitalize a corporation; the absence of corporate assets, and undercapitalization; the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; the concealment and misrepresentation of the identity of the responsible ownership, management and financial interest or concealment of personal business activities; the disregard of legal formalities and the failure to maintain arm’s length relationships among related entities; the use of the corporate entity to procure labor, services or merchandise for another person or entity; the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; the contracting with another with intent to avoid performance by use of a corporation as a subterfuge of illegal transactions; and the formation and use of a corporation to transfer to it the existing liability of another person or entity [citation].'” 645 P.2d at 77-78 (quoting Arnold v. Browne, supra, 103 Cal.Rptr.”

  “State ex rel. Christensen v. Nugget Coal Co., 60 Wyo. 51, 144 P.2d 944, 952 (1944).”

  “The determination of whether the doctrine applies centers on whether there is an element of injustice, fundamental unfairness, or inequity.”

  “In that regard, it is instructive that: “Every state that has enacted LLC piercing legislation has chosen to follow corporate law standards and not develop a separate LLC standard.””

  “We conclude the equitable remedy of piercing the veil is an available remedy under the Wyoming Limited Liability Company Act.”

• Mantle v. N. Star Energy & Constr. LLC, 2019 WY 29 (Wyo. 2019)

  This case does not appear to be directly relevant to the research request, as it does not mention crypto laws. However, it does discuss Wyoming LLC law in depth, including the rights and duties of members and managers, and may be useful as background information.

  “In CML V, LLC v. Bax , 6 A.3d 238 (Del. Ch. 2010), aff’d , 28 A.3d 1037 (Del. 2011), the court held that a creditor of an insolvent LLC lacked standing to sue derivatively under Delaware’s limited liability company act. The creditor argued the same considerations that give creditors standing to pursue derivative claims against the directors of insolvent corporations entitle creditors to sue derivatively on behalf of an insolvent LLC. Id. at 241.”

  Section 17-29-902 creates a statutory right to bring a derivative action on behalf of an LLC. Section 17-29-903(a) states that such an action “may be maintained only by a person that is a member at the time the action is commenced and remains a member while the action continues.””

  “We have recognized that Wyoming created new types of business entities, such as the LLC, in part to avoid the “many formal requirements as to [a corporation’s] structure and governance,” and that [a] limited liability company’s ‘operation is intended to be much more flexible than a corporation’s.’ “”

• Hassler v. Circle C Res., 2022 WY 28 (Wyo. 2022)

  This case does not appear to be directly relevant to the research request, as it does not mention LLCs or cryptocurrency. However, it does discuss the enforceability of noncompete agreements in Wyoming, which may be useful background information for understanding the state’s business laws more generally.

  “See, e.g., Century Surety Co. v. Jim Hipner, LLC, 2016 WY 81, ¶ 20, 377 P.3d 784, 792 (Wyo. 2016) (insurance contract against public policy was “illegal and void” (citation omitted)); Combs v. Sherry-Combs, 865 P.2d 50, 54 (Wyo. 1993) (postnuptial agreement providing for a divorce by termination of contract was void as against public policy); Hede v. Gilstrap, 2005 WY 24, ¶ 24, 107 P.3d 158, 168 (Wyo. 2005) (agreement giving a biological grandparent visitation rights after the child was adopted violated public policy and was void (citing Matter of Adoption of RDS, 787 P.2d 968, 970-71 (Wyo. 1990)). [¶14] When considering the enforceability of agreements not to compete, the court must balance competing principles – the public’s interest in free competition and trade, the parties’ freedom to contract, and the employee’s freedom to work. See Hopper, 861 P.2d at 539.”

  “Hopper, 861 P.2d at 540. Because a noncompete agreement is a restraint on trade it “‘is prima facie invalid, ‘” as a violation of public policy.”

  “Skaf, ¶ 44, 495 P.3d at 902 (quoting Ferrofluidics Corp. v. Advanced Vacuum Components, Inc., 968 F.2d 1463, 1469 (1st Cir. 1992), and Durapin, Inc. v. Am.”

  “In those instances where a truly unreasonable covenant operates as a restraint of trade, it will not be enforced.”

• Tram Tower Townhouse Ass’n v. Weiner, 2022 WY 58 (Wyo. 2022)

  “If we affirm the ruling, the Association’s claim will be resolved and it will remain dismissed from the case, focusing future proceedings on the remaining issues between the other parties. If we reverse the ruling, future proceedings will focus on the legality of the 1998 conveyance, which could be dispositive and avoid an unnecessary-or, at the very least, premature-trial on membership interests in the 2006 LLC. II.”

  “The Association disputes application of each. [¶43] Under W.R.C.P. 56(a), a movant is entitled to summary judgment when he shows “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” We review the court’s summary judgment ruling de novo.”

  “Because the undisputed facts of record establish, as a matter of law, that laches bars the Association’s claim that the 1998 conveyance was unlawful, we affirm on that basis.”

• Lieberman v. Wyoming. Com, 2004 WY 1 (Wyo. 2004)
• Greenhunter Energy, Inc. v. W. Ecosystems Tech., Inc., 2014 WY 144 (Wyo. 2014)
• Lieberman v. Wyoming.com LLC, 11 P.3d 353 (Wyo. 2000)
• N. Fork Land & Cattle, LLLP v. First Am. Title Ins. Co., 2015 WY 150 (Wyo. 2015)

Secondary Sources & Analysis:

The below secondary sources and analysis may also be helpful:

• The Distributed Ledger: Blockchain, Digital Assets and Smart Contracts – August 2021

  This analysis is relevant to the research request because it discusses a Wyoming law that allows decentralized autonomous organizations to incorporate as limited liability companies. However, the analysis does not provide a citation to the law, which would have been helpful for further research.

  “Wyoming Passes New Legislation Recognizing DAOs as LLCs On April 21, 2021, Wyoming Governor Mark Gordon signed Bill 38, allowing the state to legally recognize decentralized autonomous organizations (DAOs) as limited liability companies. The bill was sponsored by Wyoming’s Select Committee on Blockchain, Financial Technology and Digital Innovation Technology and took effect on July 1, 2021. Under the law, a DAO must maintain its presence in Wyoming through a registered agent and include proper designation in its articles of organization (self-identifying as a “DAO,” “DAO LLC,” or “LAO” (Limited Liability Autonomous Organization)). Importantly, the legislation ensures that members of a DAO will not be held personally liable for the debts and liabilities of the company, addressing a concern that a DAO could be construed as a partnership. DAO Background Generally, DAOs are decentralized entities that make governance decisions, and implement certain actions through the use of blockchain-based “smart contracts” (i.e., pieces of computer code that execute specified functions when given certain data).”

• Wyoming Signs Cryptocurrency Bills Into Law

  This analysis is relevant to the research request because it discusses five bills that Wyoming enacted in 2018 to relax the state’s regulatory framework for cryptocurrency and to facilitate the development of blockchain and cryptocurrency businesses. However, the analysis does not mention any cases, which the research request specifically calls for.

  In March 2018, the state of Wyoming signaled its fervent support for the growth and development of blockchain and cryptocurrency by enacting into law a flurry of legislation intended to make the state a haven for certain types of ICOs and blockchain-related businesses. Of the five bills recently signed into law by Governor Mead, three relax the state’s regulatory framework for cryptocurrency and two amend the state’s corporations code so as to better facilitate the development of blockchain and cryptocurrency businesses. HB 19: The “Virtual Currency Exemption” exempts cryptocurrency from the Wyoming Money Transmitter Act, which regulates the licensure of professionals and businesses involved with electronic money transfers or transmittals.”

  “HB 70: The “Utility Token Bill” tackles the ambiguity surrounding the definition of a “utility token” by exempting them from the state’s securities regulations, so long as they satisfy three requirements: Issuers do not market them as investments.”

  “HB 101: The “Blockchain Fillings Bill” updates the Wyoming Business Corporations Act to authorize the creation and use of blockchain technology for (i) the purpose of storing records, (ii) the use of a network address to identify a corporation’s shareholder, and (iii) the acceptance of shareholder votes signed by network signatures.”

• Wyoming Enacts Trailblazing Blockchain and Cryptocurrency Legislation

  This analysis is relevant to the research request because it discusses five bills that comprise the Wyoming Blockchain Legislation, which addresses various aspects of blockchain and cryptocurrency law in Wyoming. However, as an analysis written by another lawyer, it is not a legal authority and only has persuasive value.

  “During the week of March 5, 2018, Wyoming passed comprehensive legislation crafted to convince blockchain and cryptocurrency businesses to locate within its borders and avail themselves of what many consider favorable corporate and tax laws. The Wyoming Blockchain Legislation is significant as it represents the first comprehensive effort to address numerous nuances in securities law, corporate law, banking regulation and tax that have to date proven to be barriers to blockchain and cryptocurrency businesses flourishing in the United States. By being an early adopter, Wyoming may now become a jurisdiction of choice not only for sector-specific ventures in blockchain-related technology but also for exchanges of cryptocurrency and the issuance of non-securities “utility tokens” in arenas such as insurance and health care.”

  “While the regulation of blockchain and cryptocurrency activities on a federal level remains uncertain, the Wyoming Blockchain Legislation aims to facilitate the development of business in these fast-emerging areas by providing a predictable legal and regulatory environment. Businesses that are considering implementation of blockchain and virtual currencies as part of their overall plans should review carefully the Wyoming Blockchain Legislation to ascertain whether its provisions provide value propositions for their enterprises compared with other jurisdictions within and outside of the United States.”

• Part II: With New DAO Law on the Books, Utah Joins Race with Wyoming and Tennessee to Become U.S. “Crypto Capital”

  This analysis discusses the Wyoming DAO law (SF0038) and its amendment (SF0068), which are both relevant to the research request. It also provides some background information on the development of state DAO LLC laws in general, which may be helpful for understanding the Wyoming law in context. However, the analysis does not summarize any cases, so it only partially answers the research request.

  “As discussed in Part I of this series, state DAO LLC laws have been enacted in the last several years and have become one option for decentralized autonomous organizations (or DAOs) to create a so-called “legal wrapper” or real-world corporate entity to shield individual members from liability.”

  “As discussed below, the Wyoming (SF0038, codified at W.S. §17‑31‑101 through §17‑31‑116; Wyoming Governor Mark Gordon signed an amendment to the DAO Supplement into law (SF0068) (the DAO Supplement and its 2022 amendments) (collectively, the “WY Law”) and Tennessee (HB2645/SB2854, to be codified at Tenn. Code Ann. §48-250-101 through 48-250-115) (the “TN Law”), DAO LLC laws opt for the “wrapper” approach by “wrapping” DAOs within an LLC.”

  “In general terms, the Wyoming and Tennessee laws make DAOs a subtype of LLCs.”

  “Code Ann. §48-250-103). DAOs based outside the U.S. are excluded from being formed under both the Wyoming and Tennessee DAO laws (W.S. § 17-31-116; Tenn. Code Ann. §48-250-115). By classifying DAOs this way, the laws provide the regulatory certainty and legal precedent associated with LLCs to DAOs.”

• Wyoming Enacts Comprehensive Blockchain Legislation

  This analysis is relevant to the research request because it discusses several Wyoming bills that impact cryptocurrency businesses, including B. 0019, B. 0070, F. 0111, B. 0101, and B. 0126. However, the analysis does not provide any case law, which the research request also calls for.

  “As numerous states propose and enact legislation focused on blockchain technology and cryptocurrencies, in 2018, no state has been more aggressive in this space than Wyoming. In March, the state legislature passed several bills impacting cryptocurrency businesses, each of which is designed to position Wyoming as a blockchain-friendly environment for businesses. B. 0019: This bill removes a significant hurdle by amending the Wyoming Money Transmitter Act to exempt the buying, selling, issuing or taking custody of virtual currency from licensing requirements. “Virtual currency” is defined in the bill as digital representations of value that are used as a medium of exchange, unit of account or store of value and which is not recognized as legal tender by the United States government. B. 0070: House Bill 0070, known as the “Utility Token Bill,” provides exemptions from state securities and money transmissions laws for developers, sellers and persons who facilitate the exchange of “open blockchain tokens.””

  “This bill exempts virtual currencies from property taxation.”

• Wyoming Takes the Lead With Decentralized Autonomous Organizations

  This analysis discusses Wyoming’s Decentralized Autonomous Organizations Supplement bill (SF0038), which recognizes DAOs as a distinct form of the limited liability company. It is relevant to the research request because it is a Wyoming LLC crypto law. However, the analysis does not summarize any cases, so it only partially answers the research request.

  “But DAOs have received little legal analysis or recognition until recently when Wyoming passed its Decentralized Autonomous Organizations Supplement in March, 2021 (SF0038). Regulators have been slow to respond because DAOs present a unique problem: Who is responsible when something goes wrong?”

  “Back in 1977, Wyoming was the first state to authorize the creation of limited liability companies or “LLCs.””

  “With its DAO Supplement bill, Wyoming has become the first state to regulate DAOs, recognizing them as a distinct form of the limited liability company. This recognition endows DAOs with the multiple benefits characteristic to LLCs, including limited liability for its owners, a more flexible management structure than is permitted in other corporate forms, and potentially advantageous default rules.”