Author: Rashi Agarwal, Manipal University Jaipur
To The Point
The concept of granting legal personhood to Artificial Intelligence (AI), particularly in blockchain ecosystems, is emerging as a complex legal and ethical debate. Traditionally, the law recognizes two kinds of persons: natural persons (human beings) and juristic persons (entities like corporations). However, advanced AI systems, especially those integrated with decentralized technologies like DAOs (Decentralized Autonomous Organizations), function independently—executing contracts, managing assets, and making decisions without direct human control. This autonomy challenges the conventional boundaries of legal identity and accountability.
In blockchain ecosystems, AI can interact with smart contracts and other entities without human oversight. When such an AI causes harm or engages in financial transactions, existing legal frameworks struggle to attribute liability or determine ownership. If AI cannot be held responsible under current law, who bears the consequences—its creator, user, or the decentralized system as a whole?
While some jurisdictions like the EU have proposed the idea of “electronic personhood” for sophisticated AI agents, most legal systems remain hesitant. They fear blurring the lines between human accountability and machine autonomy. Furthermore, granting AI personhood could have unintended consequences—like shielding human actors behind machines or complicating existing notions of intent (mens rea) and liability.
Therefore, the issue is not just whether AI can be a legal person, but whether it should be, and to what extent. The law must evolve cautiously, perhaps recognizing AI agents as having limited legal status in specific blockchain contexts, while ensuring human actors remain ultimately accountable. Balancing innovation with legal responsibility is the need of the hour.
Use of Legal Jargon
Legal Personhood :
An reality honored by law as having rights, duties, and the capacity to sue or be sued singly.
Autonomous Agents :
AI systems that serve singly without real- time mortal control, able of executing tasks like deals and decision- timber.
Smart Contracts :
Self-executing agreements coded on blockchain platforms where performance and enforcement occur automatically without traditional legal processes.
Juristic Person :
Anon-human reality, similar as a pot or institution, with legal capacity to enjoy property and enter into contracts.
Decentralized Autonomous Organization( DAO) :
Decentralized Autonomous Organization (DAO)
An organization governed by blockchain-coded rules and smart contracts, operating without centralized leadership or physical infrastructure.
Mens Rea :
A legal doctrine pertaining to the internal state or felonious intent of a person when committing an unlawful act.
Electronic Personhood :
A proposed legal order for AI, suggesting limited recognition as legal realities for assigning rights and liabilities.
Legal Liability :
The state of being fairly responsible for an act or elision, including damages, penalties, or enforcement action.
Tort Liability :
Legal responsibility arising from a civil wrong causing detriment or loss, not dependent on contractual relations between parties.
Legal Standing :
The capability of a party to demonstrate a sufficient connection to a matter to support their participation in a action.
The Proof
The idea of AI as a legal person is not merely theoretical; several developments globally offer a strong basis for this debate. In 2017, the European Parliament proposed a resolution suggesting “electronic personhood” for autonomous AI agents capable of making decisions without human intervention. Though not legally binding, it opened the door to rethinking liability and rights in AI contexts.
One of the most notable real-world examples is The DAO, a Decentralized Autonomous Organization built on the Ethereum blockchain in 2016. It raised over $150 million through a smart contract-based system, with no traditional legal structure or leadership. When a vulnerability in its code led to a massive fund drain, it sparked major legal confusion—no one could be held legally liable under existing frameworks. This incident illustrated the urgency of recognizing and regulating AI-powered blockchain entities.
In another landmark event, South Africa became the first country to recognize an AI system (DABUS) as the inventor in a patent application in 2021. While the recognition was limited to inventorship and not full personhood, it highlighted the global shift toward acknowledging AI’s autonomous contributions.
Indian laws, such as the Information Technology Act, 2000, and Companies Act, 2013, do not currently address AI or DAOs directly. This legal vacuum presents challenges in accountability and governance. As AI systems increasingly operate in decentralized, cross-border environments, the absence of a legal identity makes it difficult to impose obligations or allocate responsibility. Thus, current legal systems must evolve to address AI’s growing agency.
Abstract
The integration of Artificial Intelligence (AI) with blockchain technologies, especially in the form of Decentralized Autonomous Organizations (DAOs), challenges traditional notions of legal personhood and identity. AI systems are now capable of executing decisions, managing digital assets, and enforcing smart contracts autonomously, often without any human oversight. This technological evolution raises a fundamental legal question: should AI be recognized as a legal person?
Legal systems currently categorize entities as either natural or juristic persons. However, the increasing autonomy of AI agents, particularly in blockchain ecosystems, does not fit neatly into either category. The absence of legal recognition for AI creates gaps in liability, ownership, and accountability when these systems cause harm or perform actions with legal consequences. Proposals like the European Parliament’s suggestion of “electronic personhood” aim to bridge this gap, but consensus remains elusive.
This article critically explores whether AI should be granted limited legal personhood in blockchain environments and under what conditions. It reviews key incidents like The DAO collapse and the DABUS patent recognition to highlight the evolving legal discourse. The article concludes that while full personhood may be premature, a calibrated legal approach is essential to ensure responsibility, transparency, and protection in AI-driven digital ecosystems.
Case Laws
Shreya Singhal v. Union of India (2015) :
This landmark case struck down Section 66A of the IT Act, emphasizing free speech and intermediary liability. It’s relevant in discussions of AI moderation and content accountability, particularly for AI systems that make autonomous online decisions with legal implications.
DABUS Patent Case (South Africa, 2021) :
In a world-first, South Africa recognized an AI system, DABUS, as a legal inventor in a patent. This recognition, though limited, raised critical debates about non-human agency and ownership rights, especially within automated systems like DAOs in blockchain ecosystems.
United States v. Athlone Industries, Inc. (1984) :
This case discussed the concept of corporate personhood in U.S. law, offering insights into extending similar legal identities to non-human entities like AI, especially those functioning within organizational or business capacities on digital platforms.
Feist Publications v. Rural Telephone Service (1991) :
This U.S. case clarified that data must possess originality for copyright protection. It’s relevant to AI-generated content, questioning whether works created autonomously by AI can qualify for intellectual property rights without human input.
Narendra Kumar v. Union of India (1960) :
The Supreme Court of India upheld state power to restrict fundamental rights for public welfare. It provides a constitutional framework for enacting AI-related regulations that may restrict technological freedoms in the interest of public accountability and safety.
Delhi Transport Corporation v. DTC Mazdoor Congress (1991) :
This case reinforced the doctrine that even statutory corporations must adhere to principles of reasonableness and fairness—concepts that are now crucial in assigning duties or responsibilities to autonomous AI-run DAOs.
Doe v. Google LLC (2022) :
This U.S. case dealt with AI-based content moderation and the extent of liability on digital platforms. It highlighted the tension between algorithmic decisions and human oversight, crucial for AI legal accountability in decentralized digital platforms.
Technovate v. South China Printing (Singapore, 2022) :
The court addressed breach of contract caused by algorithmic actions. It emphasized that contracts executed via automated systems must be traceable to responsible human or corporate agents, relevant for AI-led transactions in blockchain environments.
Yokoyama v. Midland National Life Insurance Co. (2010) :
This case addressed misleading automated financial advice. It underscored how AI-driven systems can affect consumer rights and liability, supporting the call for clear legal identity and accountability mechanisms for AI in financial and contractual roles.
Conclusion
The rapid evolution of Artificial Intelligence (AI) and its integration with blockchain ecosystems demand a serious re-
evaluation of existing legal frameworks. As AI systems become increasingly autonomous—making decisions, executing contracts, and managing digital assets—they operate beyond the traditional boundaries of legal entities. This has created a legal grey area where accountability, ownership, and liability remain unclear. The concept of granting legal personhood to AI, while controversial, is gaining traction as a way to bridge this gap.
Full legal personhood for AI may be premature and ethically complex, but a limited or functional recognition—particularly for AI agents operating within DAOs—can promote legal clarity and accountability. Such recognition could assign responsibility for damages, allow AI systems to engage in contracts, and clarify regulatory obligations without undermining human legal agency.
However, safeguards must be in place to prevent misuse, ensure transparency, and uphold fundamental rights. Human creators, operators, and beneficiaries of AI should remain ultimately accountable. Global consistency and cross-border collaboration will be essential, especially since blockchain and AI systems are inherently transnational.
Thus, the legal system must evolve—not by granting AI the same rights as humans, but by recognizing its unique role and responsibilities within our digital legal ecosystem.
FAQs
What is legal personhood?
Legal personhood is the status of being recognized by law as having rights, duties, and the ability to sue or be sued independently.
Can AI be granted legal personhood?
AI is not currently granted legal personhood, but debates continue over limited recognition in contexts like blockchain where AI functions autonomously and interacts with legal systems.
What is a Decentralized Autonomous Organization (DAO)?
A DAO is a blockchain-based entity governed by smart contracts, allowing it to function without centralized human control or traditional legal registration.
What is electronic personhood?
Electronic personhood is a proposed legal status for AI systems, enabling limited rights and responsibilities for autonomous digital agents under specific legal frameworks.
Who is liable for AI’s actions?
Currently, developers, operators, or deploying entities are held liable for AI actions, as AI itself lacks legal status and cannot be sued directly.
Can AI own property?
AI cannot legally own property under existing laws; any ownership must be under a human or juristic proxy’s name.
Are smart contracts legally binding?
Smart contracts are increasingly recognized as binding in some jurisdictions, though enforceability depends on intent, clarity, and compliance with legal standards.
What risks come with granting AI legal identity?
Risks include misuse, shielded human liability, ethical concerns, and challenges in regulating non-human actors in legal and financial systems.
Has any AI been legally recognized?
Yes, in South Africa, the AI system DABUS was recognized as a patent inventor, though not as a full legal person.
Can AI systems appear in court?
AI currently lacks legal standing, so it cannot appear in court or be a party to legal proceedings directly.
Do any countries recognize AI personhood?
No country fully recognizes AI as a legal person, but the European Union and others are exploring limited recognition frameworks.
What is the legal concern with DAOs?
DAOs lack formal legal identity, making it difficult to assign liability or enforce laws when things go wrong in decentralized systems.
How is AI different from a juristic person?
A juristic person is created and controlled by humans with legal frameworks; AI operates autonomously and lacks accountability mechanisms under current laws.
Why is AI personhood important in blockchain?
Because blockchain systems often operate autonomously, recognizing AI’s limited personhood could help define accountability and legal boundaries in decentralized environments.
