SEC to Allow Onchain Trading of Tokenized U.S. Stocks, With Strict Limits

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The U.S. Securities and Exchange Commission on Thursday issued an “Innovation Exemption” that allows tokenized stocks to be traded directly on the blockchain. Trading platforms the agency calls “Tokenized Securities Venues” (TSVs) receive a temporary exemption from having to register as an exchange. Trading will run through automated market makers and liquidity pools (AMM Liquidity Pools) familiar from decentralized finance, but only in a permissioned environment. The exemption is valid for five years after publication, according to the SEC’s announcement.

SEC Chairman Paul S. Atkins called it “a significant step forward” to bring America’s capital markets “into the digital age” in a statement. While temporary, the exemption allows trading to begin now as the agency considers whether further action is needed. Jamie Selway, director of the SEC’s Division of Trading and Markets, described the decision as “an important milestone” for tokenized securities.

What the Exemption Allows

The order covers so-called NMS stocks, meaning shares listed on major U.S. exchanges such as the NYSE and Nasdaq. A TSV brings together buyers and sellers of these tokenized shares by providing one or more liquidity pools and setting the standards for who may access them. According to Forbes, venues may also pair tokenized stocks with crypto assets that are not securities themselves, such as stablecoins.

The SEC is also granting liquidity providers in these pools an exemption from the definition of “dealer.” This applies to firms that supply tokenized stock to the pools using their own capital, quote prices to customers or commit capital. The condition is that their securities activities remain limited to trading tokenized NMS stock.

The timing is politically delicate. The CLARITY Act, which would have addressed tokenized securities and the division of oversight between the SEC and the CFTC, was recently blocked in the U.S. Senate. With the Innovation Exemption, the SEC is taking a narrower route through an exemption within its existing authority.

The Restrictions

The list of conditions is long, and it makes clear that this is a controlled experiment:

• Caps: According to Forbes, each venue may list at most 75 large U.S. stocks, with trading volume capped at 0.25 percent of each stock’s average daily volume. For Nvidia, that would amount to roughly 300,000 shares a day. Less actively traded stocks face a limit of 250 symbols and 2.5 percent of daily volume.
• Equal rights: Tokens must carry the same rights as the underlying shares, including dividends, voting rights and claims in a liquidation. Purely synthetic products that only track the price are therefore excluded.
• Issuer veto: If a stock is tokenized by an unaffiliated third party, the venue must notify the listed company in writing beforehand. The company then has 30 days to object.
• Open blockchains: Smart contracts must be public, auditable and deployed on a public, permissionless blockchain.
• Linked trading halts: If trading in a stock is halted on its primary listing exchange, trading in the token must stop at the same time.
• No leverage, no IPOs: Margin trading and other forms of borrowed trading are prohibited, as are initial share offerings through the venues.
• Access and transparency: Users must be verified (KYC), and the pools remain permissioned. Venues must disclose their operations and the trading activity of their affiliates, and publish a notice at least 30 days before launching.

Observers note that several questions remain open, including the boundary between SEC and CFTC jurisdiction, a durable framework for crypto exchanges and the regulation of decentralized finance as a whole. The SEC has launched a public consultation alongside the order, asking among other things how the volume and symbol caps will affect liquidity.

Who Stands to Benefit

The stock market reaction was clear. According to CoinDesk, shares of tokenization provider Securitize jumped 14 percent. Chief executive Carlos Domingo called the decision “extremely positive because it gives a way to trade real tokenized stocks.” Bullish, CoinDesk’s parent company, gained 10 percent. The company recently agreed to acquire the transfer agent Equiniti for $4.2 billion to position itself in tokenized equities.

The likeliest winners are providers whose tokens already represent full shareholder rights. They include Superstate with issuer-sponsored tokenization, Dinari with a custodial model that preserves shareholder rights, and Fairmint as a regulated onchain transfer agent. Fairmint’s chief executive called the issuer veto “the key safeguard.”

On the infrastructure side, decentralized exchanges such as Uniswap, Aerodrome and Raydium could benefit, since the SEC now explicitly permits their AMM model as a trading mechanism. Aerodrome co-founder Alex Cutler told Forbes that the SEC appeared to be “just dipping their toes in,” adding: “If you think back three, four years, I mean this is just incredible to see coming out of the US regulator.” Blockchains such as Ethereum, Solana, BNB Chain and Coinbase’s Base are also likely to see more activity around tokenized assets.

So far, the clearest effect has been in the crypto market, where the news sent altcoins sharply higher. As Trending Topics reported, some tokens rose as much as 31 percent, far outpacing Bitcoin. Uniswap led the way.

Robinhood, Kraken and Ondo Face Changes

The picture is less clear for companies that already offer tokenized stocks. Robinhood’s Stock Tokens, Kraken’s xStocks and Ondo Finance’s offshore products are aimed at users outside the United States and mainly track price performance without full shareholder rights. In their current form, they do not fit the new framework, according to CoinDesk. Robinhood, which recently made a major push into tokenization with its own blockchain, nonetheless welcomed the move, saying it “will allow liquid tokenized securities markets to develop onshore.” Its shares rose 2.8 percent, while Coinbase gained 5 percent.

Whether the major crypto exchanges will operate as TSVs themselves or continue their offerings outside the new framework remains to be seen. What is clear is that anyone who wants to offer regulated onchain stock trading in the United States will need to provide genuine tokens with legally equivalent rights, and within tight volume limits. The next five years will serve as a test phase, meant to end in permanent rules.