CFTC wins lawsuit against Ooki DAO.

A federal judge has ruled in favor of the U.S. Commodity Futures Trading Commission (CFTC) in a lawsuit against decentralized autonomous organization (DAO) Ooki DAO. The lawsuit claimed that Ooki DAO offered unregistered commodities, challenging the perception that decentralized finance (DeFi) entities are exempt from regulatory oversight.

On Thursday, U.S. District Judge William H. Orrick declared that Ooki DAO operated an illegal trading platform and acted unlawfully as an unregistered futures commission merchant (FCM), awarding the CFTC a default judgment. The organization has been ordered to pay a penalty of $643,542 as well as permanently cease its operations and shut down its website.

The original lawsuit was filed in September of last year in the U.S. District Court for the Northern District of California. The lawsuit alleged that the DAO offered “leveraged and margined” commodities transactions to retail customers and failed to comply with know-your-customer laws when serving those traders.

Read more: CFTC’s Ooki DAO Action Shatters Illusion of Regulator-Proof Protocol

In January, the CFTC requested a federal judge to declare that the DAO violated federal commodities laws after the DAO missed a deadline to respond to the lawsuit. However, a judge dismissed the request.

Although Ooki DAO never formally responded to or acknowledged the lawsuit, it did geofence the United States after the lawsuit was filed.

Decentralized finance (DeFi) players have long avoided the legal scrutiny faced by their centralized counterparts, but this may be changing. In March, a California court held bZx protocol and its token-holding community members liable for losses resulting from an exploit that drained their DAO’s treasury. And in April, the Securities Exchange Commission (SEC) subpoenaed SushiSwap Head Chef Jared Grey.

Edited by Nikhilesh De.