Algorithmic Entities

This Article argues that algorithmic entities (legal entities that have no human controllers, also know as DAO's or DCO's), greatly exacerbate the threat of artificial intelligence - ssrn.com

This paper by the same author twenty years ago offers insight into how the author thinks - cornell.edu

Abstract

Algorithmic entities are likely to prosper first and most in criminal, terrorist, and other anti-social activities because that is where they have their greatest comparative advantage over human-controlled entities.

Control of legal entities will contribute to the threat algorithms pose by providing them with identities. Those identities will enable them to conceal their algorithmic natures while they participate in commerce, accumulate wealth, and carry out anti-social activities.

Four aspects of corporate law make the human race vulnerable to the threat of algorithmic entities. - First, algorithms can lawfully have exclusive control of not just American LLC’s but also a large majority of the entity forms in most countries. - Second, entities can change regulatory regimes quickly and easily through migration. - Third, governments—particularly in the United States—lack the ability to determine who controls the entities they charter and so cannot determine which have non-human controllers. - Lastly, corporate charter competition, combined with ease of entity migration, makes it virtually impossible for any government to regulate algorithmic control of entities.

This paper is about risk to the very notion of governance - Algorithmic Entities by Lynn M. LoPucki - papers.ssrn.com

Linking Algorithms and Entities

Although an algorithm has no rights of its own, Bayern has shown that by giving an algorithm control of a legal entity, an initiator can confer on the algorithm the ability to exercise the entity’s rights.66 Because those legal rights are the rights of “persons,” Bayern argues that such a link confers “personhood” on the algorithm.

Bayern asserts that the New York Limited Liability Company Act and the Uniform Limited Liability Company Act (ULLCA) permit LLCs to exist without members. His assertion is questionable with respect to both statutes.

But Bayern does specify at least one chain of events that is capable of establishing AEs under those statutes: E.g., Cal. Corp. Code § 5310 (2014) (providing, with respect to nonprofit public benefit corporations that a corporation “may admit persons to membership, as provided in its articles or bylaws, or may provide in its articles or bylaws that it shall have no members”)

“The end result is novel legal personhood—or at least a functional analogue of it - without any ongoing commitment by, or subservience to, a preexisting person.” - lawandai.com

The proposed technique is as follows: - (1) Existing person P establishes member-managed LLCs A and B, with identical operating agreements both providing that the entity is controlled by an autonomous system that is not a preexisting legal person; - (2) P causes A to be admitted as a member of B and B to be admitted as a member of A; - (3) P withdraws from both entities. The result does not trigger the law’s response to memberless entities, because what remains are simply two entities with one member each.

# Citations

Shawn Bayern, The Implications of Modern Business Entity Law for the Regulation of Autonomous Systems, 19 STAN. TECH. L. REV. 93, 104 n.43 (2015) [hereinafter Bayern, Entity Law]; Shawn Bayern, Of Bitcoins, Independently Wealthy Software, and the Zero-Member LLC, 108 NW. U. L. REV. 1485, 1496–97 (2014) [hereinafter Bayern, Wealthy Software].

Bayern, S. (2016). The Implications of Modern Business–Entity Law for the Regulation of Autonomous Systems. European Journal of Risk Regulation, 7(2), 297–309 - doi

- Self-owning corporations are legally possible - ycombinator

Chartering artificial entities is a highly profitable business. Virtually every government sells charters and hundreds of governments at the national or local level actively compete for the sales in a multi-billion dollar market. The competing governments consistently resist reform. pdf