I wrote this originally in response to a post by cyphar (https://news.ycombinator.com/reply?id=11942889), but I'd really love a response from anyone with more knowledge or thoughts on how the law might interpret this situation in relation to already existing "virtual legal systems". cyphar wrote:

"It was definitely fraud. Either it was a contract, in which case "taking $50 million without anyone's consent" doesn't pass the officious bystander test. Otherwise it wasn't a contract, so the default is still fraud (though in that case, the DAO would be the thing being defrauded rather than the investors)."

I'd like significantly more details on your legal theory for how this was "definitely fraud" or how "the default is fraud" if there was no legal contract, the split executor was a direct party to the agreement, and the terms of the agreement were followed. "$50 million" was not taken, 3.6 million or so "ether" was split out from the original smart contract/account, which may or may not end up having some dollar value.

In at least two previous threads [1, 2], comparisons were made to the MMOG EVE Online (developed by CCP Games), and I think the analogy raises some interesting questions. EVE is a self-contained artificial system that, so long the system framework itself is not exploited, is ruled entirely by code. It has a digital currency (ISK) that has an official conversion rate from real world fiat currency to ISK, and an unofficial ToS breaking (but non-criminal AFAIK) conversion rate from ISK back to fiat. CCP has nothing to do with this exchange, but exchanges for ether to other currencies are also 3rd party. Virtual items as well as ISK itself thus have calculable value, both within the system, in terms of time/rarity, and in terms of nation-state issued money. There are person-actor driven "contracts" of various sorts, and people driven markets. There is fraud, piracy, and pure chaotic destruction as well, and that's considered entirely within the system framework so long as the overall code rules of the world are not violated.

Given that, what exactly is the legal difference between the DAO and EVE Online? In EVE, if Alice attacks Bob, or infiltrates his organization, and steals/destroys a few hundred billion in ISK (equivalent to a few thousand dollars at current exchange rate), or sets up a fraudulent bank/scheme that makes off with hundreds of billions or trillions (this has actually happened), do you think Bob should be able to sue in a real world court of law? The essence of the situation looks similar/identical to me: that the parties are operating under a non-contract non-legal agreement to be governed within the a specific set of world rules, and that therefore any interactions within those world rules, however angry they might get about it on a personal level and whatever colloquial English they might use to describe it, creates no legal standing of any sort outside. If EVE client/server were hacked (the world rules distorted) it'd be an issue (though still not necessarily a legal one), just as if the Ethereum VM was hacked it'd be an issue, but if those were operating entirely as they should be then what's the basis of legal complaint? What's the generalized objective basis for court involvement in people agreeing to mess around with made up numbers on computers, even if other people decide to try to exchange those numbers for money?

1: https://news.ycombinator.com/item?id=11925904

2: https://news.ycombinator.com/item?id=11929208