The Illusion of Democracy— Why Voting in Decentralized Autonomous Organizations Is Doomed to Fail

63 Pages Posted: 10 May 2023 Last revised: 4 Jun 2024

See all articles by Xuan Liu

Xuan Liu

New York University School of Law

Date Written: February 19, 2024


This article presents the first in-depth analysis of the reality of voting within Decentralized Autonomous Organizations (DAOs) by examining over 4,963 voting events through a combination of quantitative and qualitative research methods. DAOs have risen to prominence as an innovation in business organization models, with advocates highlighting their potential to offer democratic, non-hierarchical governance, lower agency costs, and evade regulatory oversight. However, this study reveals that DAOs are inherently susceptible to low voter participation, contradicting their decentralized ethos by potentially centralizing decision-making power and casting doubt on their democratic promise. These findings carry significant implications for the classification of DAO tokens as securities, hinging on their genuinely decentralized decision-making attributes. This article suggests policy interventions to stimulate voter engagement and foster genuine decentralization. Additionally, it introduces a novel regulatory framework—the “probationary business classification”— for DAO classification, considering the dynamic nature of DAO governance. This approach seeks to reconcile the decentralized ambitions of DAOs with the realities of their operational structures, potentially reshaping the regulatory landscape for DAO tokens.

Keywords: Decentralized Autonomous Organizations, Voting, Crypto, Corporate Governance, DAO Token, Securities Regulation on DAO Token

Suggested Citation

Liu, Xuan, The Illusion of Democracy— Why Voting in Decentralized Autonomous Organizations Is Doomed to Fail (February 19, 2024). NYU Law and Economics Research Paper No. 24-13, Available at SSRN: or

Xuan Liu (Contact Author)

New York University School of Law ( email )

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