Aave Labs, Veda, and Kamino Submit Legal Framework for Decentralized Lending to SEC

Aave Labs, Veda, and Kamino have jointly released a public summary of a legal framework for decentralized lending protocols and non-custodial vaults. The three organizations submitted a detailed confidential version to the U.S. Securities and Exchange Commission (SEC) on October 26 and requested a meeting with staff, arguing that transactions where users provide assets to the protocol or collateralize loans with their own assets do not fall under U.S. federal securities laws, provided they align with the design features described in the documents. The framework posits that community governance mechanisms, which are open and time-locked, adjusting market rules do not equate to managing investments on behalf of users; regulatory assessments should focus on the transactions themselves rather than whether a token is issued. The document does not request a safe harbor or regulatory exemption but seeks SEC confirmation of its interpretation of existing laws. Aave Labs emphasizes that the relevant conclusions depend on the specific design of the protocol and do not represent an endorsement of the aforementioned position by the SEC.

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