Could Some Vaults Trigger Securities Law? Yes, but It's Case by Case

Summary

Sun Raghupathi, CEO of Veda, explains how onchain vaults work, the risk layers involved, and why SEC Commissioner Hester Peirce’s recent statement that some vaults could be securities is a nuanced but ultimately positive development. He highlights Veda’s partnership with Kraken, which has already attracted $600M in assets, as evidence that enterprise distribution is the path to making DeFi mainstream. The conversation also covers the Stream Finance fallout, curator evaluation, and the emerging but untested role of insurance in vault products.

• Vaults are onchain vehicles packaging DeFi markets for simple user access, with $67B in total TVL.
• Three key risk layers: smart contract bugs, operational/key management failures, and economic/collateral risk.
• The Stream Finance blowup ($285M exposure) caused curators to scale back risk-taking, but similar events are likely as DeFi supports long-tail assets.
• SEC Commissioner Peirce’s statement implies vaults could be securities depending on design, which Raghupathi sees as a step toward needed regulatory clarity.
• Veda provides infrastructure, curators manage risk, and distributors like Kraken, Robinhood, and Coinbase deliver products to end users.
• Kraken DeFi earn, built with Veda and curator Centura, grew to over $600M AUM and 80,000 users, validating the enterprise distribution model.
• Insurance for vaults is seen as compelling but remains largely untested, with no major claims processed yet.
• Curator evaluation should focus on operating history, underwriting expertise, and ability to handle both traditional and DeFi-specific technical risks.