A Wall Street bank expects limited demand for tokenized US stocks despite the SEC’s new framework opening a path for blockchain-based equity trading, arguing American investors already get what tokenization promises from regular brokers.
TD Cowen analyst Reid Noch, vice president of US equity market structure at the firm, laid out the case in a research paper published Friday, days after the SEC’s Innovation Exemption took effect. The conditional relief, announced September 17, lets approved Tokenized Securities Venues trade tokenized National Market System stocks using permissioned automated market makers and liquidity pools. Eligible liquidity providers also get temporary relief from certain dealer-registration requirements, and each participating venue faces limits on how many stocks it supports and how much volume it can process.
The bank’s core argument is simple. “U.S. investors already have efficient access to the underlying shares,” Noch wrote. Tokenized platforms would need a compelling benefit to offset their operational complexity and thin liquidity, and he does not see one for most US traders.
24-hour trading is not the selling point it looks like
The clearest advantage a blockchain venue offers is extended hours. US exchanges run their main sessions between 9:30 a.m. and 4 p.m. Eastern on weekdays, and several brokers already provide premarket and after-hours access, which reduces the value of a separate round-the-clock venue for domestic traders.
Noch warned that continuous access does not guarantee good execution. A liquidity pool with limited assets can produce weaker prices, especially when fewer traders and market makers are active outside the main US session. Automated market makers price transactions from the assets deposited in their pools rather than from matching buyers and sellers in an order book, so the size and composition of each pool drives the price quality. A venue may stay technically open all day, but investors could still prefer established exchanges if the on-chain market offers worse prices or higher costs.
The strongest existing comparison supports the bank’s skepticism. Figure, a crypto-adjacent lender, has Nasdaq-listed FIGR shares and blockchain-native FGRS tokens carrying identical economic exposure and voting rights. In the 24-hour period TD Cowen studied, conventional FIGR shares accounted for 99.9 percent of the company’s notional trading. Equal rights on both rails have not moved meaningful volume off Nasdaq.
| TD Cowen finding | Detail |
|---|---|
| Figure trading split | 99.9% of notional volume went through Nasdaq-listed FIGR, 0.1% through on-chain FGRS |
| Issuer interest | Minimal demand across dozens of issuers, outside crypto-linked companies |
| Issuer objection window | 30 days for a listed company to block tokenization of its shares |
| Nvidia perps on Binance | 96% of notional volume in perpetual futures, 4% in spot products |
| SEC relief scope | Five-year exemption for qualifying venues, announced Sept. 17 |
Issuers can still say no
The SEC framework gives listed companies a veto. Before a third party tokenizes a company’s shares, the proposed venue must notify the issuer, which then has 30 days to object. Trading cannot proceed under the exemption when an issuer blocks it.
That matters because Noch’s conversations with dozens of issuers found little interest in offering tokenized shares, and the group included companies with large retail investor bases. Crypto-linked businesses such as Figure were the exception. If most large issuers object, the universe of tokenizable stocks stays small no matter how much demand develops.
The investor protections attached to the experiment are strict. Approved tokens must represent NMS stocks and preserve the economic interest, dividends, voting power, and liquidation rights of the underlying shares. Synthetic products that merely track a stock price do not qualify. Smart contracts must be public and auditable, operators must disclose trading activity and related-party transactions, and a venue must halt a tokenized stock whenever the primary exchange halts the underlying shares, so round-the-clock availability does not override an official trading halt.
The SEC has also moved on the plumbing behind the tokens. In early September it proposed an overhaul of transfer-agent rules covering digital ownership records, cybersecurity, asset protection and third-party technology providers. Transfer agents maintain the official shareholder register used for voting, dividends, stock splits and other corporate actions, and those records become critical when a token claims to represent legal ownership of a share.
Perpetual futures are the demand story instead
Where US investors do want leveraged stock exposure, TD Cowen sees it flowing to perpetual futures rather than spot tokens. A snapshot of Nvidia-related trading on Binance showed perpetuals generating 96 percent of notional volume, with spot products at 4 percent. The contracts have no expiration date, use recurring funding payments to track the underlying stock, and offer leverage, which appeals to retail traders but raises liquidation risk when prices move against them.
“We see perpetual futures as the stronger demand story,” Noch wrote. The bank expects platforms to keep adding the products inside and outside the United States.
Coinbase filed proposals on September 18 for more than 50 stock perpetuals tied to companies including Nvidia, Microsoft and Tesla, with 24-hour trading planned Monday through Friday if regulators clear the contracts. The products would give leveraged price exposure without voting rights, dividends or share ownership, and the company has not announced a launch date. Ondo Finance separately asked the SEC and CFTC to apply existing security-futures rules to stock perpetuals, telling regulators its Panama-based affiliate processed $8 billion in cumulative volume in about six weeks, settling in stablecoins and unavailable to US users.
The market has already priced some of this optimism. Coinbase, Robinhood and Circle shares jumped after the SEC announcement, and Coinbase Derivatives asked the CFTC to certify perpetual futures on single US stocks including Apple and Nvidia, a filing that lifted COIN shares 12 percent. TD Cowen’s paper is the first major sell-side pushback on how much of that enthusiasm translates into actual tokenized trading volume, and it lands at a moment when crypto-linked equities are riding a broader rally.