The U.S. Securities and Exchange Commission has created a temporary regulatory pathway for qualifying on-chain venues to facilitate trading in tokenized shares of U.S.-listed companies.
The SEC’s Innovation Exemption permits eligible Tokenized Securities Venues to support trading in tokenized National Market System stocks through permissioned automated market makers and liquidity pools. The exemption will remain in effect for five years after publication, unless broader regulatory changes replace it sooner.
Tokenized shares must mirror conventional stocks
The exemption does not establish an unrestricted alternative stock market. Tokenized versions must provide holders with the same rights and privileges as the corresponding traditional securities. The SEC also imposed limits on the symbols that venues may support and on trading volumes.
Smart contracts used by participating venues must be auditable and publicly accessible, with deployment taking place on a public, permissionless distributed ledger. In addition, if trading in the underlying stock is halted on its primary exchange, trading in the tokenized version must also stop.
A controlled test for on-chain markets
The framework gives crypto infrastructure companies and other market participants a defined way to test blockchain-based execution while maintaining a connection to existing securities-market rules. It also allows the SEC to gather experience and feedback before deciding whether a more permanent structure for tokenized equities is appropriate.
The decision does not replace Nasdaq, the New York Stock Exchange or other established trading venues, nor does it immediately move U.S. equities onto blockchains. Instead, it creates a limited five-year environment in which qualifying venues can explore secondary trading of tokenized shares under specified investor-protection and market-integrity conditions.
