Aave, Kamino and Veda split with Morpho over how SEC should treat DeFi vaults

The DeFi world just showed up to the SEC with two very different maps. On Tuesday, November 3, Aave, Solana-based Kamino and vault infrastructure firm Veda filed their view on how yield-generating crypto vaults should be regulated. Their pitch: securities law should track the rights, obligations and powers an on-chain setup actually creates — who owns the assets, who promises repayment, who pulls the strings.

For the trio, human discretion or active management by a DAO shouldn't automatically drag a vault under securities law. As long as users still own the assets and can withdraw whenever they want, they argue the vault can be treated as non-custodial. Their conclusion is blunt: most vaults sit outside the SEC's current definition of a security, according to AMBCrypto.

Morpho and the Crypto Council for Innovation see it differently. Under the framework they back, some vaults steered by risk curators could count as securities, since those curators function as managers choosing lending markets. Their argument goes further — even DAO-run protocols might be read as centralized managers, which would trigger securities law.

Aave pushed back hard on the curator question. The protocol's position: a curator paid to make investment decisions about securities may be an investment adviser, but it doesn't have custody, because the code won't let it touch users' assets. And on DAOs, the trio's line is that they exist for governance, not management.

Zoom out and vaults are basically managed funds — mutual funds or ETFs, except on-chain and executed by smart contracts. They turn idle assets into automated yield strategies. Some are run by risk curators like Steakhouse or Gauntlet; others are pure code with no humans in the loop. The SEC has already conceded in recent guidance that not all vaults are the same.

The money is moving regardless of the legal fight. Vault assets under management climbed 61% in the second half, landing at $11 billion, up from $7 billion. With tokenization hype building, the SEC's call on human intervention could decide how big that number gets next.