The US Securities and Exchange Commission has opened a regulated route for tokenised stock trading, granting temporary, conditional relief for platforms seeking to trade tokenised US-listed stocks through permissioned automated market makers and liquidity pools.
The “Innovation Exemption”, published on 17 September, allows qualifying Tokenised Securities Venues, or TSVs, to receive relief from the definition of an exchange while facilitating secondary trading in tokenised National Market System stocks. No primary issuance or initial offering of securities is permitted under the exemption. The order also grants conditional relief from the definition of a dealer to certain liquidity providers.
A temporary regulatory route
The SEC defines a TSV as an organisation, association or group that provides one or more permissioned AMM liquidity pools and sets the standards for participant access. Its smart contracts must be public, auditable and deployed on a permissionless distributed ledger. A companion exemption frees firms that supply their own capital to a venue’s liquidity pool, and may also quote prices to customers, from registering as dealers.
SEC chairman Paul Atkins said the order was intended to let platforms test the model while the Commission weighs whether further regulatory change is needed. “Today, the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age by facilitating onchain trading of certain tokenized stocks through the ‘Innovation Exemption,'” he said.
Timing against a stalled Congress
The order came two days after the Senate rejected a cloture motion on the Digital Asset Market Clarity Act, the crypto market-structure bill that would have divided oversight of digital assets between the SEC and the Commodity Futures Trading Commission. The official Senate roll call recorded 49 votes in favour and 50 against on 15 September, 11 short of the 60 needed to proceed.
With that legislative route blocked for now, the exemption gives the SEC a temporary way to allow limited tokenised-stock trading within its existing authority, not a substitute for the framework Congress failed to pass. Commissioner Mark Uyeda, backing the order, called the use of exemptive powers to enable innovation “a well-trod path” for the Commission, pointing to money market funds and ETFs as precedent.
Conditions on tokenised stocks
The SEC has imposed conditions on both the venues and the assets they make available. A TSV must verify that a tokenised stock gives holders the same rights and privileges as the equivalent traditional stock. Where a third party rather than the issuer itself has created the token, the venue must notify the issuer, who then has at least 30 days from receiving that notice to object in writing; trading cannot begin on that venue until the objection window has passed.
The order also limits the number of symbols and the trading volume each venue can carry, requires trading to halt whenever the underlying stock’s own listing exchange halts it, and requires venues to publish their own operations and trading data.
An industry voice on what comes next
Richard Baker, founder and chief executive of Tokenovate, a firm that builds settlement infrastructure for tokenised markets, said the exemption gives firms a regulated environment in which to develop tokenised equity trading, but warned that post-trade infrastructure needs to keep pace.
“Tokenised equities may trade around the clock, but markets can only move as fast as the post-trade infrastructure behind them,” Baker said. “The SEC’s five-year exemption gives firms a regulated environment in which to develop this model in the US, with investor rights and issuer involvement built in.
“As trading becomes continuous, settlement and collateral processes must keep pace. Common standards and legal certainty will be needed so that tokenised assets can be recognised and managed consistently across platforms and markets. Without that foundation, the industry risks carrying the same fragmentation into a new market structure.”
Wall Street’s early reaction
A Goldman Sachs note, as reported by Crypto Briefing on 20 September, identified Coinbase as a potential early beneficiary of the exemption. The analysts argued that its existing tokenised-equity products appeared closer to the order’s shareholder-rights and dividend conditions than some competing offerings.
The same analysis took a more cautious view of Robinhood, saying its existing offshore derivative products fall outside the exemption and might need to be reworked for a qualifying tokenised-equity model. Coinbase and Robinhood shares rose in the days after the order, though the moves also reflected broader trading conditions.
A test for onchain markets
The exemption expires five years after publication, and the SEC has invited public comment on all aspects of it, with no deadline yet set. It marks a regulatory step towards onchain trading of listed shares, but it isn’t a blanket approval of tokenised stocks, and it doesn’t remove the need for venues and liquidity providers to meet its conditions.
