Crypto lending protocol Aave says SEC review now closed

• SEC closes its four year inquiry into Aave with no enforcement recommendation, easing near term legal uncertainty for the lending protocol.
• Total value locked on Aave rose from about $13.21 billion to roughly $32.79 billion in that period, showing continued on-chain activity.
• Trump-linked World Liberty Financial proposed building on Aave, bought nearly $1 million in AAVE tokens, and now focuses on its USD1 stablecoin.

The United States Securities and Exchange Commission has closed a four-year investigation into Aave without recommending any enforcement action, a turning point for one of the largest decentralized lending protocols and a signal of how Washington now treats major DeFi platforms. In a letter shared by founder and CEO Stani Kulechov, the agency said it does not intend to pursue a case against the protocol, ending a process that began around 2021 and that forced the team to devote significant time, money, and attention to regulatory defense. Aave now faces the next phase of its growth without the immediate cloud of SEC litigation, even as broader questions about DeFi policy, privacy tools, and Trump-era enforcement priorities remain unresolved.

Aave SEC investigation closes without enforcement

The SEC’s letter to the project followed the standard “case closed” format under Securities Act Release No. 5310, which states that staff will not recommend an enforcement action but that the agency may revisit its position if circumstances change. According to reporting that published the text of the letter, staff told Aave that the investigation had concluded and that no enforcement recommendation was planned, bringing an end to a confidential probe that had stretched for roughly four years. The investigation began when the commission intensified scrutiny of crypto lending and governance tokens, grouping Aave with a wider set of DeFi and CeFi lending businesses that handled large pools of customer assets and interest-bearing products. Stani Kulechov announced the outcome on X, describing how the process required “significant effort and resources” from both the core team and the wider ecosystem to protect the protocol and, in his view, DeFi as a whole. He argued that decentralized lending platforms had faced unfair pressure in recent years and framed the end of the case as a chance for developers to focus again on building financial applications instead of responding to subpoenas and interviews. In public comments, the SEC declined to say anything beyond its usual line that it does not confirm or deny the existence of investigations, a reminder that only Aave’s side chose to make this particular case public. For the protocol, closure removes a key source of regulatory uncertainty. For years, users, token holders, and institutional partners had to factor in the possibility of a future lawsuit that might target token design, governance structures, or specific lending markets. Those concerns do not disappear overnight, because the letter does not function as an exoneration, but the balance shifts. Today the record shows that, after four years of review, SEC staff decided not to press charges against Aave, even while other high-profile crypto cases moved forward.

Market reaction and protocol growth for Aave

The market response to the announcement stayed measured rather than dramatic. The AAVE token traded near the mid-$180 range on December 16, 2025, with intraday reports citing a price around $186 and a 24-hour move of roughly one to two percent, in line with CoinGecko’s data showing a modest single-digit daily increase. That kind of move suggests traders had already priced in a lower probability of an aggressive lawsuit or simply reacted cautiously, given wider market volatility. Underlying protocol metrics tell a more striking story. Decrypt, citing DefiLlama, noted that at the time of its coverage Aave held about $32.79 billion in assets, up from roughly $13.21 billion when the SEC opened its investigation four years earlier. More recent DeFiLlama dashboards now show the combined protocol with around $55 billion in total value locked, including more than $26 billion on Ethereum alone and over $21 billion in outstanding borrows, making the platform one of the largest lenders in crypto. This growth took place despite repeated market drawdowns, a shrinking overall DeFi TVL, and a regulatory environment that remained uncertain for most of that period. Beyond TVL, fee and revenue data point to a protocol that functions as critical infrastructure rather than a speculative side project. DefiLlama estimates annualized fees close to $890 million and annualized revenue above $100 million, with cumulative protocol fees nearing $1.9 billion. Those figures help explain why Aave attracted attention from regulators in the first place and why the outcome of its investigation matters across DeFi. They also explain why governance debates hit high stakes: recent community discussions about a change from ParaSwap to CoW Swap on the main interface, for example, focused on whether that switch might redirect up to $10 million in annual swap-fee revenue away from the DAO treasury.

SEC crypto reset from Ripple to DeFi lending

The end of the Aave probe does not exist in isolation. It fits into a broad pattern that has emerged under President Donald Trump’s current administration, where the SEC has moved away from the aggressive “regulation by enforcement” strategy that defined the years under former Chair Gary Gensler. Since early 2025, the commission has dropped or settled a series of headline cases involving major exchanges and token projects, including actions against Binance, Coinbase, Kraken, and others. The Ripple Labs case marks the clearest example of this shift. In August 2025, the SEC and Ripple agreed to end their multiyear legal battle, leaving in place a $125 million civil penalty and a ruling that treated XRP as a security only when sold to institutional investors, not when traded on public exchanges. Both sides withdrew their appeals, closing one of the most closely watched crypto enforcement actions of the past decade and signaling that the agency had little appetite to relitigate the question. Around the same time, the commission abandoned planned appeals of court decisions that went against its earlier positions and began to highlight future rulemaking and public roundtables as the main tools for building a digital-asset framework. A similar logic appears in other dropped investigations. Uniswap Labs disclosed that the SEC had closed its review without charges, while Gemini reported a comparable outcome for its Earn program, and Ondo Finance recently confirmed that its own confidential probe had ended with no enforcement. For industry lawyers, these decisions do not provide a formal safe harbor; instead, they show how the new commission weighs the costs and benefits of pursuit. In that context, Aave’s outcome looks like one more data point in a broader policy recalibration in which staff reserves litigation for a narrower set of issues and relies more on guidance and negotiated settlements. At the same time, the administration’s record remains mixed, especially around privacy and non-custodial tools. The Justice Department secured a five-year prison sentence for Samourai Wallet developer Keonne Rodriguez in November 2025 after he pleaded guilty to operating an unlicensed money transmitting business, a case critics describe as a direct challenge to open-source privacy infrastructure. Trump told Decrypt he would “look at” the possibility of a pardon, but a prediction market on Myriad currently assigns only about a 20% chance that Rodriguez receives one before February 2026. That contrast shows how regulatory relief for a protocol like Aave can coexist with continued pressure on developers whose work touches anonymity and transaction obfuscation.

World Liberty Financial plans and stablecoin links to Aave

Political ties add another layer to this story. In 2024, World Liberty Financial, a crypto project closely associated with Donald Trump’s political and business orbit, submitted a governance proposal to build on top of Aave’s lending markets. The plan described a vision in which the project would plug into existing liquidity pools, use the protocol’s battle-tested risk controls, and offer consumer-facing products that sit on top of that infrastructure rather than replacing it. A few months after the proposal, World Liberty Financial bought almost $1 million worth of AAVE tokens, a move that aligned its treasury with the protocol’s long-term health and voting power. Since that time, the project has shifted its public focus toward USD1, a planned stablecoin designed to fit within new stablecoin legislation that the Trump administration pushed through Congress. Even as it moved in that direction, reporting suggests the team still views Aave and other DeFi protocols as core components of its future roadmap, rather than as short-term experiments. Concrete technical integrations remain limited, but the alignment between a Trump-linked venture and a major DeFi protocol has fueled speculation about how much influence political allies might have on regulatory outcomes. Stani Kulechov has not commented publicly on whether World Liberty Financial’s activity had any impact on the SEC’s decision to end the investigation. The commission, for its part, insists that it evaluates cases based on facts and law, not on connections or token purchases. Still, the optics of a president promoting a project that explicitly chose Aave as a base layer, while his own appointees move to clear the protocol of active investigation, will likely remain part of the debate over how politics and DeFi intersect in this era.

Conclusion

The end of the SEC’s four-year investigation into Aave removes a major source of doubt for a lending protocol that already handles tens of billions of dollars in deposits and borrowings across many networks. The outcome strengthens the view that, under the current administration, regulators prefer to distinguish between decentralized systems like Aave and more centralized or opaque structures, reserving heavy enforcement for a narrower range of cases. At the same time, the continued prosecution of privacy developers such as Keonne Rodriguez and the low market-implied odds of a Trump pardon show that relief for one corner of the ecosystem does not translate into a blanket free pass for all crypto projects. For users, builders, and token holders, the case’s closure suggests that serious, multi-chain platforms with transparent governance and large user bases can operate within the United States with less fear of sudden action, as long as they keep adapting to evolving guidance. For Aave, that means the next chapter will focus less on surviving an investigation and more on managing its own governance disputes, competitive pressures, and role in a DeFi landscape that now watches how this new regulatory line holds over time.

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