In a landmark move for decentralized finance (DeFi), Grayscale Investments has filed an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) to launch a spot exchange-traded fund (ETF) for the AAVE token. The filing, dated February 13, 2026, represents the first major attempt to create a regulated investment product for a DeFi governance token and follows the successful approvals of spot Bitcoin and Ethereum ETFs.
The proposed Grayscale AAVE ETF would hold the underlying AAVE tokens directly, offering investors a familiar, regulated vehicle to gain exposure to the asset's price without the complexities of direct custody. The filing leverages Grayscale's experience from converting its Grayscale Bitcoin Trust (GBTC) into a spot ETF earlier in the year. The firm plans to charge a 2.5% sponsor fee, use Coinbase as prime broker and custodian, and list the fund on NYSE Arca.
The news triggered an immediate positive market reaction, with AAVE's price rising approximately 5% to trade around $119. The token, which powers the leading Aave lending and borrowing protocol, has a market capitalization of about $1.8 billion.
The primary hurdle for approval lies in the unresolved regulatory classification of the AAVE token. The SEC, under Chairman Gary Gensler, has maintained that most cryptocurrencies aside from Bitcoin likely qualify as securities. Grayscale's filing implicitly argues for a commodity-like classification, similar to Ethereum. Legal experts note the approval pathway may depend on demonstrating the sufficient decentralization of the Aave Protocol to distance the token's value from the managerial efforts of a central group.
This filing follows a similar proposal from asset manager Bitwise in December 2025, which covered 11 separate funds including an AAVE ETF, intensifying competition in the crypto ETF space. A successful AAVE ETF would provide new investor access, enhance liquidity for the ecosystem, and serve as a powerful endorsement of DeFi's maturity, potentially prompting other major asset managers like BlackRock or Fidelity to follow suit.
