Source publication: November 6, 2026, at 14:10 UTC+8
Status at publication: Legal frameworks submitted or published; no public SEC response reported. These were industry proposals, not regulatory decisions.
Aave Labs, the Kamino Foundation and Veda Tech Labs argued that decentralized lending protocols and noncustodial vaults fall outside federal securities laws. A separate framework from the Crypto Council for Innovation (CCI) accepted that some managed vaults could fall within those laws and proposed an exemption pathway.
The distinction matters for exchange-linked onchain savings products and institutional lending: when does allocating a user’s assets across lending markets become managing a securities investment?
The comparison below reflects reporting by Sanqing of Foresight News, republished by PANews, and preserves its November 2026 reporting context.
Timeline: publications and requests, not SEC approval
- July 22: In a statement cited by the article, SEC Commissioner Hester Peirce described vaults as a spectrum—from allocations determined entirely by code to allocations determined entirely by someone else’s discretion.
- October: CCI published Under Control, an approximately 238-page vault report. A coalition led by Morpho, Bitwise and Galaxy supported the report, which Chapman and Cutler drafted.
- October 26: Aave Labs, the Kamino Foundation and Veda submitted a more detailed, confidential legal framework to the SEC’s Crypto Task Force and Division of Corporation Finance. They also requested a meeting with SEC staff.
- November 2: Those three organizations published a 16-page summary of their framework.
- November 6, at publication: The source reported no public SEC response. It identified no date for a decision or meeting.
Where the frameworks agree
Both distinguish ordinary onchain overcollateralized lending from centralized lending businesses such as BlockFi and Celsius.
At those centralized platforms, the source explains, customers transferred ownership of deposited tokens, while the platform pooled assets and decided how to lend or invest them. Repayment depended on the business. In 2022, BlockFi agreed to pay $100 million to the SEC and state authorities to settle charges involving its interest accounts. After Celsius entered bankruptcy, a court found under its customer terms that deposited assets belonged to the platform, leaving affected users as unsecured creditors.
The two frameworks describe a different arrangement for ordinary decentralized lending: assets remain in smart contracts, borrowers post collateral worth more than their loans, liquidation follows predefined thresholds, and interest rates follow public formulas tied to pool utilization.
Both conclude that ordinary overcollateralized lending should not be treated as securities activity. That is their legal position, not an SEC determination.
Their reasoning differs. The Aave-led group argues that deposits do not create a “note” under the Reves test—and would not constitute securities even if analyzed as notes. CCI asks the SEC to recognize underlying lending positions as commercial loans traditionally treated as nonsecurities, while separately assessing vault-share tokens under the Howey test.
The disputed event: a manager reallocating deposits
Consider the source’s hypothetical: a user deposits 1 million USDC into a vault, and a manager shifts that money between lending markets each week according to interest rates.
CCI focuses on how much discretion the manager retains and whether users depend on that judgment for returns. The Aave-led group places greater weight on users retaining ownership and on the manager’s inability to take possession of their assets.
The analysis spans four legal frameworks: the Howey test for investment contracts, the Reves test for notes, the Investment Company Act of 1940 and the Investment Advisers Act of 1940.
CCI: a verifiable checklist and an exemption route
CCI sets out 10 conditions addressing asset control, redemption, segregation, parameter changes, time locks, allocation discretion, independent protective roles, audits and transparency, conflicts of interest, and custody of assets that cannot be verified onchain.
Its proposed safeguards include:
- No transfer of user assets outside destinations permitted by code.
- Redemptions that do not require another party’s cooperation, either continuously or on a disclosed schedule.
- Segregated assets and onchain records of each user’s share.
- Fixed parameters or changes made through predefined procedures.
- Advance disclosure, time locks and an opportunity to exit before changes take effect, with disclosed exceptions for changes that only reduce risk exposure.
- No discretionary post-deposit allocation beyond immutable code or preset objective parameters.
- Independent protective functions, public audits and verifiable permissions and pending changes.
- Restrictions on undisclosed material conflicts and qualified custody for assets outside onchain verification.
CCI argues that vaults satisfying all 10 conditions should not be treated as securities. Where managers can move funds without notice between markets with materially different risks, however, users may be relying on managerial judgment in a way comparable to a fund.
The report leaves room for nuance: reallocations among similarly risky markets that produce only small interest-rate differences may not amount to the essential “efforts of others” under Howey.
For vaults that do fall within securities regulation, CCI proposes an exemption roadmap. It draws a parallel with ETFs’ transition from individual exemptions to a standardized rule in 2019. One proposed condition is a designated corporate “compliance entity” responsible for SEC engagement, filings and accountability.
Aave, Kamino and Veda: ownership and bounded authority
The Aave-led framework argues that active allocation does not by itself make a vault a security. Users retain ownership, managers cannot take the assets, and no one promises repayment of principal plus interest. It disputes both the existence of a Reves “note” and a Howey “common enterprise.”
That conclusion depends on design constraints: managers must operate within preset limits and cannot immediately expand their own authority. Material changes to strategies or permissions require independent approval and time locks that let users exit first.
The framework also argues that a vault without an entity owning the underlying assets and issuing shares is not an investment company. It gives the example of a vault holding 80% tokenized equities to illustrate that position.
Manager registration is a separate question. Under this argument, reallocating stablecoin loans that are not securities would not constitute securities advice. A compensated manager allocating to tokenized stocks or other securities could, however, face investment-adviser registration and existing rules, including those governing performance fees.
Unlike CCI, the group seeks confirmation that qualifying protocols and vaults already fall outside securities laws, rather than an exemption.
Why governance and business models matter
Aave’s DAO can adjust interest-rate models, collateral ratios and liquidation thresholds, subject to notice and time locks. The source argues that Aave can satisfy CCI’s safeguards where users can exit before changes take effect. But the Aave-led group wants explicit confirmation that upgradeability and continuing governance do not themselves establish securities status.
The source also connects the proposals to different operating models:
- Aave: Most deposits remained in V3 public pools governed by common DAO rules. V4 was introducing external managers: Sentora launched in October, with risk-increasing changes subject to a 48-hour time lock. The cited Aave Pro page showed V4 deposits above $1.7 billion.
- Morpho: Managers select markets and exposures for vaults distributed through exchanges and fintech firms. Morpho said on October 29 that manager-run assets had grown from zero to more than $11 billion in two years. Coinbase and Robinhood products built on Morpho vaults each exceeded $500 million in deposits in September.
- Kamino: Its V2 also separates markets from vaults, with managers such as Steakhouse, Re7 Labs and MEV Capital reallocating across markets. Nevertheless, it backed the Aave-led position.
- Veda: Its multiprotocol vault infrastructure, including for Kraken DeFi Earn, had more than $600 million in deposits, according to the source. Reallocation needs could make CCI’s restrictions on discretionary allocation difficult to satisfy.
These are not isolated camps. Sentora worked across Morpho, Veda and Aave V4, while Galaxy operated vaults on both Morpho and Kamino.
What remained unresolved
The central disagreement was not ordinary overcollateralized lending. It was the regulatory treatment of vaults that retain meaningful human allocation or governance powers.
CCI offered a narrower, checkable nonsecurity boundary plus a proposed compliance route for other vaults. The Aave-led group sought a broader exclusion under existing law, but the source noted that it did not provide an equivalent fallback route for vaults themselves if the SEC rejected that interpretation.
As of the source’s publication, neither approach had been publicly accepted by the SEC. The meeting request was a procedural step, not confirmation of a meeting, a decision deadline or a change in legal status.
Original article: PANews, reporting by Sanqing, Foresight News