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Key Takeaways
- The SEC’s exemption lets Tokenized Securities Venues trade real, ownership-bearing stock tokens with built-in volume and listing caps to keep the initial phase limited.
- Qualifying tokens must carry the same voting rights and dividends as underlying shares, and issuers get a 30-day objection window before third-party listings.
- The SEC held the framework back while Congress weighed the Clarity Act, releasing it days after that bill failed to advance in the Senate.
The U.S. Securities and Exchange Commission unveiled a long-awaited “innovation exemption” Thursday that gives qualifying platforms a five-year window to trade tokenized U.S. stocks on public blockchains without registering as national securities exchanges.
The framework marks the first regulated U.S. pathway for trading real, ownership-bearing stock tokens rather than synthetic products that merely track share prices.
What the Exemption Allows
Under the exemption, specialized platforms called Tokenized Securities Venues, or TSVs, can facilitate trading in eligible tokenized U.S. stocks through smart contracts and blockchain-based liquidity pools instead of the order-book model traditional exchanges use.
Certain firms that supply assets to those liquidity pools can separately receive relief from dealer registration requirements.
The underlying blockchain software must be public and auditable, and deployed on a public, permissionless network. Access to the trading venue itself remains permissioned, meaning participants still need to meet a venue’s access requirements even though the technology underneath is open. The exemption does not permit leverage or lending on a TSV.
Trading Caps Keep the Experiment Small
The SEC built volume and listing limits into the program. For the most liquid stocks, each venue can tokenize up to 75 names and handle no more than 0.25% of a stock’s average daily trading volume. For a second tier of less liquid stocks, the cap rises to 250 names and 2.5% of average daily volume.
Jamie Selway, the SEC’s director of trading and markets, said the caps were designed to keep the initial phase limited while regulators gather data.
“The motivation for that was to, obviously, make a modest start. Let’s get people going, measure the effect.”
Applied to a heavily traded stock like Tesla, which has an average daily volume of about 40 million shares, the limit would allow a qualifying venue to facilitate trading in roughly 100,000 tokenized shares a day. This is about $36.6 million at a $366 share price.
Ownership Rights Must Carry Over, and Issuers Get a Veto
A qualifying tokenized stock must grant its holder the same rights as the underlying traditional share, including voting rights and dividends. If trading in the underlying stock halts on its primary market, the tokenized version must halt as well.
Products that merely track a stock’s price without conferring ownership rights do not qualify for the exemption, a category the SEC has said includes some tokenized-stock products marketed overseas.
Tokenization can be carried out either by the company that issued the stock or, under certain conditions, by an unaffiliated third party. A venue must give the underlying company 30 days’ notice before listing a tokenized version of its stock created by a third party, and the company can object to the listing during that window.
Joris Delanoue, chief executive of regulated on-chain transfer agent Fairmint, said the objection mechanism functions as the framework’s central protection for issuers. The provision addresses a dispute that surfaced this month after AMC Entertainment’s chief executive criticized Robinhood for offering AMC-linked stock tokens without the company’s involvement.
Perpetual swaps tied to equities, a product that has grown popular on crypto trading platforms including Hyperliquid, fall outside the exemption because they provide derivative price exposure rather than actual stock ownership.
Industry Reaction and Timing
Securitize Chief Executive Carlos Domingo said he expects the framework to accelerate development of tokenized securities with genuine ownership rights and to eventually support multiple on-chain trading venues for them.
“This is like a super good middle ground that will allow a lot of crypto innovation to happen in a controlled and regulated way.”
Dinari Chief Executive Gabo Otte said preserving shareholder rights was central to the framework’s design.
“Putting stocks onchain shouldn’t mean stripping away the rights that make them stocks in the first place.”
The exemption had been in development for more than a year, but the SEC held back its release while Congress considered the Clarity Act, a broader crypto market-structure bill. That legislation failed to advance in the Senate on Tuesday, falling short of the 60 votes needed to proceed.
SEC Chairman Paul Atkins said the following day that the agency would act within its existing authority to provide regulatory certainty for the industry, and the tokenization exemption followed a day later.
Part of a Broader SEC Tokenization Effort
Selway said the agency chose to use its exemptive authority rather than issue a finished rule so it could start with a smaller program, collect evidence and use those results to inform future rulemaking or legislation.
He added that fully compliant tokenized equity products, structured under U.S. securities law, could prove more attractive to investors than synthetic alternatives over time. The exemption itself does not restrict or change the legal status of existing synthetic products.
The exemption is the second major piece of tokenization policy the SEC has advanced this month. Earlier in September, the agency proposed allowing blockchain records to serve as the official record of securities ownership, which would address who legally owns a tokenized share. Thursday’s exemption addresses a separate question: where and how that share can be traded.
