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The U.S. Securities and Exchange Commission (SEC) issued a statement warning that smart contract-based vaults and on-chain lending protocols may fall under federal securities regulations. The SEC noted that vaults, which allocate user assets to yield strategies such as staking and lending via smart contracts, could involve securities law oversight. Entities managing vaults—including those selecting yield strategies, reallocating funds among assets, or choosing investment managers—must assess whether their activities are subject to federal securities laws. Similarly, parties involved in managing on-chain lending protocols, such as setting interest rates, determining supported assets, establishing loan-to-value (LTV) limits, or defining liquidation criteria, need to evaluate potential securities law implications. The SEC also highlighted that on-chain lending strategies may raise significant securities law issues, as loans could be characterized as notes depending on participant motivations, distribution methods, and other factors. The agency invited market participants to provide feedback on whether existing rules should be modified to accommodate vaults, on-chain lending, and other innovations, while balancing investor protection, market fairness, and capital formation.
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