Aave Labs and Partners Propose Legal Framework for DeFi Lending to SEC

Aave Labs has taken significant steps to engage with regulatory authorities regarding decentralized finance (DeFi) lending. On October 26, 2026, Aave Labs, in collaboration with the Kamino Foundation and Veda Tech Labs Inc., submitted a confidential legal framework to the U.S. Securities and Exchange Commission (SEC) and requested a meeting with agency staff.

The core argument presented in the submission is straightforward: individuals who supply assets to a lending protocol or borrow against their own collateral are not entering into securities arrangements. The submission specifically addresses two product types: decentralized lending protocols and non-custodial vaults, where users maintain control over their funds.

The framework evaluates these products against four key pillars of U.S. securities law: the Howey test, Reves analysis for debt-like instruments, the Investment Company Act of 1940, and the Investment Advisers Act. The groups concluded that these arrangements do not qualify as investment contracts, are not subject to Reves, and do not create advisory relationships requiring custody rules.

Central to the argument is the emphasis on ownership and control. Aave Labs highlighted that participants in these protocols retain ownership of their assets and that the protocols do not promise repayment. Furthermore, governance decisions are made through transparent, community-led processes rather than traditional investment management.

The public summary of the framework was released between November 2 and 3, 2026, while the full submission remains confidential. This initiative is particularly significant given the reported $50 billion in digital assets across lending protocol markets by October 2026.

This is not Aave's first engagement with the SEC. The current filing follows previous discussions and comes after the conclusion of an SEC investigation into the Aave protocol that ended in December 2025 without enforcement recommendations. The collaboration with Kamino and Veda shifts the conversation from a single-protocol perspective to a broader sector position.

While the filing is a legal argument from interested parties, it is not an SEC ruling or approval. Should the SEC engage with or accept this reasoning, it could lead to reduced regulatory uncertainty, potentially attracting institutional interest in the DeFi lending space.