SEC creates temporary pathway for tokenized stock trading
The U.S. Securities and Exchange Commission issued an order Thursday that creates a temporary regulatory pathway for certain trading venues to issue tokenized representations of publicly traded U.S. stocks, effective immediately.
The SEC’s “Innovation Exemption” provides regulatory relief for tokenized stock trading if specified conditions are met, including that token holders retain the same rights as traditional shareholders.
Innovation Exemption takes effect immediately
The SEC order is designed to enable tokenized stock trading under a five-year exemption. While it is not formal rulemaking, the SEC said the program is meant to inform future regulatory decisions and determine whether additional legislation is needed.
SEC Chair Paul Atkins said the exemption is intended to address challenges that have limited responsible innovation in the United States while maintaining investor protections and market integrity standards.
Token holders must keep traditional rights
A central requirement is that holders of stock tokens must receive the same rights and privileges they would have with traditional equity holdings. The order specifies rights including receiving dividends and exercising voting rights.
Companies can block tokenization
The SEC order also gives issuers a role in whether their securities can be represented as tokens. Companies can object to having their securities tokenized.
Trading platforms must notify the company of their intention to tokenize the shares and wait 30 days after the company receives the notice before starting token trading. If the company objects during that 30-day period, the trading venue cannot make the tokenized stock available for trading.
Volume limits aim to reduce volatility
The SEC’s exemption includes volume limits intended to mitigate risks tied to thinner trading and potential large price swings. The SEC said it is monitoring market development as the exemption operates.
Push follows failed Clarity Act push in the Senate
The SEC move comes two days after the Clarity Act failed to advance in the Senate. The bill would have established clearer rules for how digital assets, including tokenized securities, are classified and regulated.
The SEC order is part of the agency’s “Project Crypto” initiative, launched last year, focused on bringing U.S. financial markets onchain.
Market context and earlier offshore launches
Tokenization has drawn attention for its potential to improve liquidity and accessibility. Coinbase, Robinhood, Gemini, and Payward’s Kraken have launched offshore tokenized equity offerings but have not offered them to U.S. customers.
The SEC’s exemption is intended to expand activity in the U.S. under existing authority, potentially supporting 24/7 trading and integration with blockchain-based financial infrastructure, while addressing investor protections through the conditions in the order.
Why it matters
The Innovation Exemption establishes near-term regulatory conditions for tokenized stock trading, including a rights framework for token holders and an issuer opt-out process. It also creates a structured test period that could shape how the SEC and Congress handle tokenized securities going forward.