The US Securities and Exchange Commission (SEC) has unveiled a five-year regulatory framework allowing qualifying platforms to operate markets for tokenized US stocks without registering as full national securities exchanges. The move seeks to distinguish between tokens representing actual stock ownership and products tracking stock prices, enabling trading through blockchain-based liquidity pools governed by smart contracts.
The exemption permits Tokenized Securities Venues (TSVs) to facilitate trading in eligible assets for five years, subject to caps on the number of tokenized stock names and trading volumes. For highly liquid stocks, venues are restricted to tokenizing up to 75 names and handling no more than 0.25% of average daily trading volume. Limits rise to 250 names and 2.5% for second-tier stocks. A qualifying venue could theoretically process up to 100,000 tokenized Tesla shares daily, valued at approximately $36.6 million at current prices.
The framework introduces a 30-day notice period for third-party proposals to tokenize securities, with the SEC’s Jamie Selway emphasizing the need to “measure the effect” of the exemption. Fairmint’s Joris Delanoue highlighted the “issuer veto” as a critical safeguard, allowing companies to block unauthorized tokenization proposals. Meanwhile, Securitize’s Carlos Domingo called the rules a “super good middle ground” for balancing crypto innovation with regulation.
The exemption explicitly prohibits leverage or lending on TSVs, raising questions about its long-term impact on traditional exchanges and decentralized finance (DeFi) structures. AMC Entertainment’s Adam Aron recently criticized Robinhood for offering AMC-linked tokens without the company’s involvement, underscoring tensions between issuers and platforms. The SEC’s approach remains untested, with uncertainties surrounding the efficacy of issuer vetoes and the framework’s ability to accelerate adoption of “native tokenized securities.”
Written by Steven Cook
Regulation Desk
