Protocols & Policy · Securities law
Aave Labs, Kamino Foundation and Veda Tech Labs published a summary of the legal paper they sent SEC staff on Oct. 26; as of 2:35 p.m. ET Nov. 3, the SEC's site showed no response.
Three crypto lending companies have asked U.S. securities regulators to agree that lending and borrowing through lending protocols, automated, publicly governed markets run by code, creates no security, the threshold question for whether the securities laws' registration rules apply. Aave Labs, Kamino Foundation and Veda Tech Labs Inc. said they sent a "detailed, confidential version" of the argument to the SEC's Crypto Task Force and Division of Corporation Finance on Oct. 26 "and asked to meet with staff," and published a 16-page public summary dated Nov. 2 [1][2].
This is an industry proposal, not SEC action. As of 2:35 p.m. ET Nov. 3, the SEC's newsroom, statements and Crypto Task Force pages showed no response [3], and Aave Labs wrote that "the paper does not claim the SEC agrees with it" [1].
The paper says it is not seeking special treatment: it "does not ask for a safe harbor, an exemptive program, a set of conditions, or a compliance entity," Aave Labs wrote, and instead "asks the SEC to confirm what that law already provides" [1]. A non-custodial vault, in the paper's terms, deploys users' deposited assets into lending markets under a strategy fixed in code or under a "curator," a manager with code-limited authority, while users keep ownership of their share [1].
Governance is the center of the case. "Tokenholders list assets, adopt interest-rate models, and set collateral and liquidation parameters," Aave Labs wrote, and the paper asks the SEC to recognize "that public, time-locked governance of market rules is administration of a market, not the promises relied upon by investors" [1]. A timelock is a built-in delay before an approved change takes effect.
Howey and Reves are the Supreme Court tests for whether a deal is an investment contract or a note, two kinds of security.
| Law | Paper's wording | Page |
|---|---|---|
| Notes (Reves) | Neither direct use nor vault participation "involves or creates a note under Reves" | 2 |
| Investment contracts (Howey) | Neither "constitutes an investment contract under Howey" | 2 |
| Investment Company Act | "the non-custodial vaults analyzed here are not investment companies" | 2 |
| Investment Advisers Act | Paid curators "may be subject to obligations under the Investment Advisers Act, but their authority under the vault arrangements analyzed here does not constitute custody" | 2 |
| Requested confirmation | "investment contract status does not turn on immutability of the protocol" | 14 |
Table: Le Coin. Source: Aave Labs, Kamino Foundation and Veda Tech Labs public summary, Nov. 2, 2026, pages as noted.
| Date | Event | Source |
|---|---|---|
| Mar. 23, 2026 | SEC 2026 Interpretation published in the Federal Register, as cited by the paper | [2, p. 5] |
| Aug. 31, 2026 | Aguilar v. Baton Corp. decided (S.D.N.Y.), as cited by the paper | [2, p. 6] |
| Oct. 26, 2026 | Confidential version sent to SEC staff | [1][2] |
| Nov. 2, 2026 | Public summary and Aave Labs post dated | [1][2] |
Table: Le Coin. Sources: Aave Labs post and public summary, Nov. 2, 2026.
The governance question overlaps with separate SEC staff FAQs added Nov. 2 on when token-holder voting makes holders a "central party," which Le Coin covered here. The paper does not cite those FAQs.
The paper carries its own limit: it "does not constitute legal advice, and the conclusions stated depend on the design features and other circumstances identified" [2, p. 1].
The authors are the parties that would benefit, and the paper's conclusions apply only to the designs it describes. Aave Labs itself names the harder cases, "actively curated vaults and performance-based fees" [1], and the paper concedes that a non-custodial design "does not displace otherwise applicable adviser obligations" [2, p. 13].
The paper asks the SEC to judge the transaction, not the token, and to treat governance that can change a market's rules as administration rather than management.
Holding the Corner.
Not financial advice.