Holding the Sentinel Shield provides the follow benefits:
While holding this shield, you have advantage on initiative rolls and Wisdom (Perception) checks.
While I wield the Sentinel Shield, can a nearby ally grab and hold on to the shield, to also gain advantage on initiative rolls and Perception checks?
The rules for wearing and wielding magic items state (emphasis mine):
Using a magic item’s properties might mean wearing or wielding it. A magic item meant to be worn must be donned in the intended fashion: boots go on the feet, gloves on the hands, hats and helmets on the head, and rings on the finger. Magic armor must be donned, a shield strapped to the arm, a cloak fastened about the shoulders.
A creature grabbing onto a shield someone else is wearing properly cannot gain the magical benefits of the shield.
If you look at the magical items available, a pattern will emerge:
While holding this magic item…
One may object and say that “while holding” indicates that it is an exception to the rule quoted above. The problem with this is that the language is so common it should be the rule, or the exception. If we permit that you only need to hold the Sentinel Shield in any fashion, here are some other effects that we can cheese:
Rod of the Pact Keeper: While holding this rod, you gain a bonus to spell attack rolls and to the saving throw DCs of your warlock spells. The bonus is determined by the rod’s rarity.
In addition, you can regain 1 warlock spell slot as an action while holding the rod. You can’t use this property again until you finish a long rest.
Staff of Charming: While holding this staff, you can use an action to expend 1 of its 10 charges to cast charm person, command, or comprehend languages from it using your spell save DC. The staff can also be used as a magic quarterstaff.
If you are holding the staff and fail a saving throw against an enchantment spell that targets only you, you can turn your failed save into a successful one.
The list goes on. The point here is that “while holding” isn’t anything exceptional among magic items, it’s just how magic item effects are usually described. So the general rules for needing to properly wear a magic item still apply, if they didn’t, it means that most magic items are an exception to the rule. But we can check one more particularly relevant item - Shield +3:
While holding this shield, you have a +3 bonus to AC. This bonus is in addition to the shield's normal bonus to AC.
New tank strategy: everyone just hold the Shield +3 so everyone gets +3 AC. This is so very obviously an exploit. This allows everyone touching the shield to get +3 AC despite the shield being totally unusable in the narrative (how can I block with it if two of my allies are also holding it?)
You can benefit from a Sentinel shield without donning it, and the plain English meaning of "hold" does allow multiple characters to hold something simultaneously. Multiple characters can benefit from Sentinel Shield or similar magic items simultaneously, so long as they can fit into the space around it.
Sentinel Shield's type is Armor (Shield)
The rules under Magic Item Categories: Armor state
Unless an armor’s description says otherwise, armor must be worn for its magic to function.
Here we are told the default is "armor must be worn" but that if an armor's description contradicts that to follow the item's description.
Sentinel Shield's description states:
While holding this shield <...>
The section of the rules under Wearing and Wielding Items is a reminder that if it must be worn, it must be worn properly (rings don't go on ponytails, hats don't go on your feet, cloaks can't be wrapped around your legs), and does not contradict the specific rules in the Magic Item Categories section.
Using a magic item’s properties might mean wearing or wielding it. A magic item meant to be worn must be donned in the intended fashion:
To determine if a magic item is meant to be worn you follow the instructions in the Magic Item Categories for the general rule applicable to each type of magic item, or to the item description.
A shield that must be wielded will say so.
The Arrow Catching Shield says
You gain a +2 bonus to AC against ranged attacks while you wield this shield.
Most weapons include this language because Magic Item Categories: Weapons does not specify that weapons must be held or wielded as a general rule, so items which require being held are always called out in the description. However there are many notable (and sensible) omissions so it's clearly not just a standard template
For example, Staff of Charming does require being held, but a +1 Javelin or Vicious Dagger weapon does not.
The +1 Javelin or Vicious Dagger would lose their magical properties instantly upon leaving your hand and not apply to thrown weapon attacks.
The Javelin of Lightning would be impossible to use, as the command word must be spoken after you hurl the item.
The Animated Shield would be completely useless (and silly). You'd have to spend an action donning the shield properly, speak the command word, and then you'd no longer be able to benefit from its magical properties the instant it left your arm. Even if it didn't turn off, it's silly to think they meant you to take an action to properly don a shield AND spend a bonus action to activate a shield. The main benefit it provides is that you can get a shield to protect you with only an object interaction to pull it out + the bonus action to activate i.
The Weapon of Warning (whose language is clearly non-standard and intended to allow you to use its effects without wielding it) would need to be wielded. There is no reason for language like this to exist on weapons if the rules under Wearing and Wielding Magic Items trump the conditions specified in the item description.
Items like Rod of Pact Keeper and Staff of Charming cannot be abused because they also require attunement, in addition to holding the item.
Of the extremely limited set of magic items which can be used while simply being held and do not require attunement, the strongest is probably +3 Shield, however even that's not necessarily overpowered. Grouping together to share this bonus makes you a sitting duck for any AOE effect and greatly restricts your parties movement and tactical options to continue benefiting from it. Even at level 1, enemies can simply run away and ready actions to attack the first party member who leaves the shield.
Jeremy Crawford's ruling supports this interpretation. On twitter he was asked:
@JeremyECrawford Sentinel Shield says, "While holding this shield", you get it's benefits. Does that mean wielded or just "holding"?
and he replied with
"Holding" means holding. #DnD #English
