The Securities and Exchange Commission on Thursday issued its long-awaited “innovation exemption,” letting platforms trade tokenized US stocks for five years without registering as national exchanges. The order also exempts liquidity providers in tokenized shares from dealer registration, removing the two biggest legal blockers that kept tokenized equities offshore.
SEC Chair Paul Atkins called the move a step toward bringing American capital markets “into the digital age.” The relief is temporary and conditional: platforms, which the SEC labels Tokenized Securities Venues, must operate permissioned markets using approved automated market makers and liquidity pools, comply with US sanctions law, and trade only tokens that carry the same rights as the underlying shares, including dividends and voting.
“The Innovation Exemption is designed to resolve challenges that have prevented responsible innovation from taking root in the United States while providing investor protections and market integrity standards,” Atkins said in a statement. Division of Trading and Markets director Jamie Selway described the order as an important milestone in the commission’s work to open capital markets for tokenized securities.
How the exemption works
Under the order, a TSV is relieved from the Exchange Act definition of an exchange, which normally forces any trading venue matching orders to register as a national securities exchange and meet the full rulebook that governs the NYSE and Nasdaq. Liquidity providers quoting prices in tokenized stocks get parallel relief from dealer registration, a requirement that had threatened market makers with heavy capital and reporting obligations.
The permissioned structure is a compromise. Rather than open, anyone-can-trade pools, a TSV sets access standards and admits only approved participants. The SEC says the design limits risk while the agency studies how onchain trading behaves in practice, and it has opened a public comment period on all aspects of the exemption.
Synthetic exposure is banned. Platforms may list shares tokenized by the issuer itself or by an unaffiliated third party, but not derivatives that merely track a stock’s price. Each token must give holders the same economic and governance rights as a conventional share.
Issuers get a veto
One condition stands to slow listings. Platforms must notify a company before listing a tokenized version of its stock, and they are barred from offering the product if the issuer objects. An SEC official confirmed the veto in a briefing, and it answers a long-running complaint from public companies worried about fragmented shareholder records and uncontrolled token distributions.
The five-year window gives the commission room to gather data before deciding whether to make the relief permanent or fold it into formal rules. The agency framed the order as a first step and invited comment on whether additional action is needed to facilitate onchain trading more broadly.
Who is positioned to move
The industry has been waiting for exactly this door to open. Coinbase has said it plans to launch tokenized stocks in the United States once rules permit. Robinhood, Kraken and several other crypto platforms already offer tokenized equities to customers in Europe and other regions, built on the argument that shares could trade around the clock, settle instantly and support fractional ownership and self-custody.
The SEC itself cited those potential benefits in its announcement, alongside lower transaction costs. Until now, US investors could only access such products through offshore venues or indirect wrappers, a gap the agency had been under pressure to close since tokenization became a policy priority.
Traditional exchanges now face a new competitive question. The exemption does not let just anyone run a tokenized market, but it does let crypto-native firms build permissioned venues inside the regulatory perimeter, competing for order flow in the same NMS stocks that trade on established exchanges.
The conditions in practice
The operational burden is real. A TSV must be a US person, screen every participant against OFAC sanctions lists, and document its access standards. The AMM liquidity pool model, borrowed from decentralized finance but walled off behind permissioning, has never operated at the scale of a national exchange, and the SEC will be watching for failures in pricing, settlement and recordkeeping.
Custody and corporate actions raise further questions the order does not fully resolve. When a tokenized share pays a dividend or a company calls a vote, the venue and the tokenization party must make sure onchain holders actually receive what a registered shareholder would. Missed corporate actions have been a recurring criticism of offshore tokenized stock products, and the same-rights condition puts that burden squarely on US venues.
There is also the question of interoperability. Tokenized shares issued on different blockchains, or by different parties for the same stock, could fragment liquidity. The order does not mandate a single chain or token standard, so venues and issuers will sort that out in the market, which is partly the point of running a five-year experiment rather than writing permanent rules now.
Market reaction was measured. The order landed a day after the Federal Reserve raised rates for the first time since 2023, and bitcoin traded near $76,000 as investors digested the Fed’s projections. Crypto policy watchers still ranked the exemption among the most consequential US digital asset actions this year, because it moves tokenized securities from concept to legally tradable product.
What happens next depends on adoption. Venues must still build the compliance stack the order demands, from sanctions screening to issuer notification workflows, and the comment period could shape a permanent framework. For now, the SEC has chosen permissioned trading under a stopwatch rather than an open market, and the industry gets five years to prove the model works.