What an SEC Staff Office Wrote About Data-Center Money

Six days between the letter and the answer

On July 23, 2026, four Latham & Watkins attorneys wrote to an office of the Securities and Exchange Commission in Washington. By the 29th, they had their answer. A weekend in between.

The question fit in a single sentence: are the securities issued to finance data-center construction "asset-backed securities" under the US securities law of 1934? The office wrote back that it agreed with the firm's analysis: no, they aren't.

To size up that turnaround, look at the other end of the clock. The rule at stake took four years to write. Dodd-Frank became law in 2010; its implementing regulation ran in the Federal Register on December 24, 2014, co-signed by six federal agencies. Four years to set the rule, six days to say an asset falls outside it.

The rule says keep some skin in the game

The rule in question is risk retention, and Wall Street already has a name for the whole idea: skin in the game. Whoever slices up a batch of assets and sells the pieces has to hold onto one and eat the loss if it turns bad.

In practice, the US regulation requires the sponsor of a securitization to keep at least 5% of the credit risk of the assets it packages. Five percent, with no hedging it away and no selling it off to someone else.

The regulation's preamble explains why, and it doesn't soften the language. During the financial crisis, the six agencies wrote, "some lenders loosened their underwriting standards, believing that the loans could be sold through a securitization by a sponsor, and that both the lender and sponsor would retain little or no continuing exposure to the loans." The rule was written to close that door. It's still on the books, and nothing in last month's letter changed it.

What goes inside a data-center securitization

Securitizing something means building a parcel. You set up a company that exists only to hold assets, then sell investors securities repaid by whatever those assets bring in. A standard securitization packages loans, auto credit, receivables.

A data-center securitization, Latham's letter says, packages something else entirely: buildings and server halls, electrical systems and backup generators, cooling, fiber, physical security, land, and the contracts needed to keep it all running, including leases in some cases.

What repays investors is net operating cash flow: what hosted customers pay, minus taxes, insurance, power, maintenance, security. The deals described typically run under 70% of appraised value at issuance, with early repayment expected around year five and final maturity at 25 to 30 years.

A loan melts, a building stays

The legal reasoning hinges on two phrases from the 1934 law. It refers to "self-liquidating" financial assets, and the Commission has interpreted that phrase since 1992 to mean assets that "by their terms convert into cash within a finite time period."

A loan is an ice cube: it melts as you pay it down, and at the end there's nothing left. A data center is the freezer. Latham puts it plainly: "in a DCS, when the Issuer repays the securities in full, the Issuer continues to own and operate the data center facility," unlike a mortgage-backed deal, where the issuer is left holding nothing at all.

There's a second, subtler leg to the argument. The law requires payments to depend "primarily" on the cash flow of the financial asset. But what's left for investors also hinges on how well the operator controls costs, starting with the power bill. A deal whose returns partly ride on the price of a kilowatt-hour isn't really a bundle of receivables anymore. It's a business.

Staff wrote it, the Commission decided nothing

This is where everything turns, and it's the single most important point in the story. No one at the SEC exempted anything, authorized anything, or decided anything.

The response is signed by Kayla Roberts, Chief of the Office of Structured Finance at the Division of Corporation Finance. It runs three paragraphs, one of which is a flat disclaimer: the letter "reflects the views of the staff of the Division of Corporation Finance," is "not a rule, regulation, or statement of the Commission," notes that "the Commission has neither approved nor disapproved its content," and states it "has no legal force or effect."

The office adds a caveat nobody should skip over: its views rest on "the representations in your letter," and "any different facts or conditions might require the Division to reach a different conclusion." Translation: a law firm described a structure, and a staff office answered based on that description. Nobody checked whether real-world deals actually match the drawing.

What nobody can put a number on yet

Then there's scale, and here we have to stop. The only figure on the table comes from Latham's own letter: the data-center securitization market has grown to represent "over $50 billion in cumulative debt issuance" since "the inaugural transaction of this type in 2018." That's the requesting firm's own number, in the document it filed; the measurement and the measuring stick come from the same hand. No independent tally confirms it, and no public registry says how many real deals actually match the structure described in the request.

The NVIDIA connection deserves the same caution. On August 10, the company announced financing platforms with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to mobilize "over $500 billion" of third-party capital. The release never once uses the words securitization or asset-backed security, never references the July 29 letter, and notes the partnerships "remain subject to execution of the final agreements." What is on record: Goldman Sachs chairman and CEO David Solomon said the deal lets the bank "create a market for credit backed by NVIDIA compute." Everything past that is a connection the public record doesn't yet support.

What's established fits in one line from the July 23 letter, and it says more than any dollar figure: "The Securitized Assets are not diminished or consumed by the repayment of the securities." That's exactly why they fall outside the definition. And it's exactly why a building full of machines, financed with debt, doesn't behave like a loan when the market turns.