Cody McGrath 
Merit Circle decentralized autonomous organizations (DAO) and Yield Guild Games (YGG) struck an agreement after the DAO had voted to remove YGG, thereby preventing a potential legal battle.
Merit Circle Ltd is a corporation that founded the Merit Circle DAO to assist gamers who are interested in play-to-earn games by lending items from its treasury and giving instructive content.
Originally, the DAO approved a proposal to dissolve YGG’s Simple Agreement for Future Tokens (SAFT) and merely repay the seed investment of 175,000 USD Coin (USDC). Despite several squabbles, YGG has made a tenfold profit on its initial investment.
The MIP-13 improvement proposal, which was passed on May 28, said that YGG gave a “lack of value” to the DAO and that the guild was a “top competitor,” not a partner, to Merit Circle. The idea would “shave the fat” from the DAO in order to “retain just those who want to see Merit Circle flourish.”
However, it’s possible that the passage of MIP-13 did not honor a legal agreement between Merit Circle and YGG, under which YGG would get tokens in exchange for its financial contribution to Merit Circle.
In reaction to the suggestion, YGG stated that it is unclear what legal authority the DAO has to void a contract Merit Circle Ltd signed on its behalf and that there was no condition for Merit Circle to rescind the contract “regardless of how this has been presented to the community.”
About the deal
To uphold the legal agreement, Merit Circle and YGG came up with a counterproposal. On June 9, it was uploaded and overwhelmingly passed, and the DAO purchased YGG’s money allocation. The guild received 1,750,000 USDC as a result, a tenfold return on its initial seed investment.
Merit Circle and YGG both expressed satisfaction with the decision on June 14, noting that the solution “still satisfies the wish of the Merit Circle community, but was also acceptable to YGG.”
They went on to say that because the original proposal conflicted with Merit Circle’s previous legal arrangement with YGG, it would have very certainly resulted in legal action.
Both parties acknowledged the “danger a precedent like this could set for the Merit Circle DAO and the industry as a whole if agreements are not upheld and investors are not respected,” as well as the “danger a precedent like this could set for the Merit Circle DAO and the industry as a whole if agreements are not upheld and investors are not respected.”
“While the legal question might certainly be debated for hours,” the groups added, “all sides felt it was wiser to settle.”
“This would spare both parties from a costly, time-consuming, legal process with uncertain outcomes. None of the parties had to settle, but both parties chose the constructive path to help Merit Circle move forward.”
While the solution ends their formal connection, Merit Circle and YGG both stated that they will continue to “give their all to growing the blockchain gaming ecosystem” and that Merit Circle will continue to get “continuous support” from YGG.