SEC Opens Door To Tokenized Stocks With New ‘Innovation Exemption’

The exemption allows Tokenized Securities Venues to use permissioned automated market makers and liquidity pools.

• TSVs must meet requirements covering transparency, recordkeeping, technology safeguards, and trading limits.
• The SEC plans to use data from the temporary framework to help inform potential longer-term rules for onchain securities.
• The framework could bring crypto-native platforms such as Robinhood and Coinbase into closer competition with traditional brokers.

The Securities and Exchange Commission on Thursday announced that it's opening a new path for tokenized U.S. stocks to trade onchain, granting temporary relief to venues that use permissioned automated market makers and liquidity pools to trade tokenized equities.

The SEC on Thursday approved an “Innovation Exemption” for qualifying Tokenized Securities Venues (TSVs) that will remain in place for the next five years, allowing them to trade tokenized National Market System stocks without being treated as an exchange under the Securities Exchange Act of 1934.

“Today, the Securities and Exchange Commission is taking a significant step forward,” SEC Chairman Paul Atkins said, calling the move an effort to bring U.S. capital markets “into the digital age.” The exemption is temporary and conditional while the Commission considers whether additional regulatory changes are needed.

SEC Opens Door To Onchain Stock Trading

The move could accelerate the convergence of traditional equities and crypto market infrastructure, potentially putting platforms such as Robinhood (HOOD), Coinbase (COIN) and Gemini (GEMI) into more direct competition with traditional brokerages including Charles Schwab (SCHW) and Morgan Stanley’s (MS) E*Trade.

Coinbase, Robinhood, Gemini and Payward’s Kraken exchange already offer tokenized equities offshore but have yet to offer it to U.S. customers.

The timing is also notable following a recent dispute between Robinhood and AMC Entertainment (AMC) over tokenized shares. AMC CEO Adam Aron objected to Robinhood offering a tokenized version of AMC stock without the company’s approval, while Robinhood CEO Vlad Tenev argued that public companies do not necessarily control third-party products referencing their shares. 

COIN stock rose nearly 4% in morning trade, while HOOD stock gained over 3%. Meanwhile, MS stock edged 0.5% lower, and SCHW shares slid around 1.4%. 

On Stocktwits, retail sentiment around three of the four firms improved, while sentiment around Coinbase remained in ‘bearish’ territory over the past day. HOOD and MS saw sentiment rise to ‘neutral’ from the ‘bearish’ zone, while SCHW saw an uptick to ‘bullish’ from ‘neutral’ territory. 

The SEC’s new framework establishes clearer conditions around that issue. TSVs must provide advance notice to issuers before listing tokenized stocks, and the exemption does not apply if the issuer objects.

Tokenized Stocks Get New Regulatory Guardrails

The exemption allows TSVs to use permissioned automated market makers and liquidity pools, but venues must comply with requirements covering public notice, transaction transparency, books and records, technology safeguards and coordination around trading halts. 

The SEC will also require regular publication of U.S. dollar-denominated transaction data, including price, size, time, pool address, end-of-day pool size and daily volume. 

The framework also sets symbol limits and volume caps tied to existing limit-up/limit-down tiers. Synthetic tokens that merely track a stock's price without representing the underlying security are excluded.

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