Aave Labs, Kamino, and Veda have formally asked the U.S. Securities and Exchange Commission to clarify how federal securities law applies to decentralized lending protocols and non-custodial vaults. The legal document was initially submitted confidentially to the SEC’s Crypto Task Force and Division of Corporation Finance on October 26, 2026, with a public technical summary released on November 2, 2026 alongside a formal meeting request.
The core argument is that on-chain deposit and borrowing activity does not create traditional debt notes or investment contracts under the Howey test. The filing states there is no centralized counterparty receiving capital or promising returns. Suppliers keep ownership and control of their assets in open smart contracts, while borrowers draw liquidity against previously locked collateral. Interest accrues through a posted per-unit rate, and individual yield does not depend on the performance of other participants.
On the common enterprise prong, the authors argue that shared computer code is not a joint investment enterprise, citing Aguilar v. Baton Corp. as precedent. Receipt tokens are described as technical accounting records that do not alter the legal nature of underlying positions. The proposal also addresses DAO governance, saying token holders manage operational rules with mandatory timelocks, allowing users to withdraw before parameter changes take effect.
The framework adds that non-custodial vaults should not be treated as investment companies because curators are bound by code and public mandates approved by depositors. However, it acknowledges that discretionary decisions over assets classified as securities could make a curator an investment adviser. Importantly, the initiative does not request an exemption or temporary safe harbor; it asks the SEC to apply existing law while recognizing the architectural differences between non-custodial software and traditional financial intermediaries.
Market participants are watching the SEC’s response closely, as clearer DeFi lending rules could shape liquidity, compliance strategies, and operational standards across the sector.
