The U.S. Securities and Exchange Commission (SEC) has concluded its nearly four-year investigation into Aave, a leading decentralized finance (DeFi) lending protocol, without recommending any enforcement action. This development, reported on December 16, 2025, removes a significant regulatory overhang for Aave Labs and signals a broader shift in the SEC's approach to crypto under the Trump administration. The probe, which began around late 2021, examined whether Aave's operations and its native AAVE token constituted unregistered securities, but the agency found no basis for charges.

✏ Investigation Background

The SEC's inquiry focused on Aave's governance model, token utility, and potential compliance with securities laws, amid a wave of DeFi scrutiny that targeted platforms for facilitating lending and borrowing without traditional intermediaries. Aave cooperated extensively, including discussions with the SEC's Crypto Task Force in June 2025, but no formal allegations were disclosed. Founder Stani Kulechov announced the closure on social media, noting the resource-intensive nature of the process, which aligns with similar outcomes for other protocols like Ondo Finance.

✏ Market and Industry Impact

AAVE's token surged about 3% immediately following the news, trading around $185, though it's down over 51% year-to-date after peaking at $377 in August. The protocol's total value locked (TVL) has exceeded $50 billion, bolstered by reduced uncertainty that could attract more institutional liquidity. This closure fits a 2025 pattern where over 60% of SEC crypto cases— including those against Coinbase, Kraken, and Uniswap—were dropped or paused, reflecting a pivot from aggressive enforcement to policy guidance.

✏ Future Outlook for DeFi

While the decision doesn't preclude future SEC actions, it provides Aave with operational clarity to advance initiatives like its V4 upgrade for enhanced liquidity pools. For the DeFi sector, this eases risks around token classifications but underscores ongoing governance challenges, such as decentralization debates.