The U.S. Securities and Exchange Commission has opened a five-year, conditional pathway for certain U.S.-based platforms to trade tokenized versions of National Market System stocks through permissioned automated market maker pools on public blockchains, without registering as national securities exchanges.
SEC order 34-106402, described by the agency as an “innovation exemption,” creates a new category of operator called a tokenized securities venue, or TSV. The framework would run from 2026 through 2031 and places on-chain equity trading inside a tightly controlled pilot rather than giving token issuers or trading platforms a general exemption from securities rules.
The order arrives shortly after the CLARITY act failed in the Senate in a 49–50 vote on Sept. 15. SEC chair Paul Atkins issued the exemption two days later, using the agency’s existing authority to establish a limited operating regime while Congress remains divided over wider cryptocurrency legislation.
Tokenized shares must carry actual shareholder rights
The exemption applies to tokenized NMS stocks, a category that includes securities traded on major U.S. equity markets. A qualifying token must represent an underlying share and give its holder the same economic and governance rights as a conventional shareholder, according to the order.
Those rights include dividends, voting, and participation in corporate actions. The requirement draws a firm boundary around the products eligible for TSV trading: platforms cannot use the exemption for synthetic tokens that merely track the price of a public stock without conveying ownership rights.
That distinction could shape how tokenized-equity products are structured. Many offshore platforms have offered instruments linked to stock prices, but a price-linked token and a token representing a legally recognized share create very different obligations for issuers, custodians, trading venues, and holders.
The SEC’s framework requires a TSV to notify an issuer in writing at least 30 days before listing a tokenized version of its stock. An issuer can block the listing by objecting during that period, while silence would be treated as consent under the order.
Issuers therefore retain an unusually direct role in determining whether their shares can be tokenized and traded through these venues. The approach could limit the number of companies represented on TSVs, particularly if public companies are reluctant to support a new trading structure before seeing evidence of its operational and legal performance.
Public blockchains, but restricted access
While the tokens and trading smart contracts must be deployed on a public, permissionless distributed ledger, access to each TSV must be controlled. Every trader and liquidity provider must be reviewed before participating, and anonymous trading is prohibited.
This structure separates the public visibility of blockchain infrastructure from the open-access model often associated with decentralized finance. The order requires smart contracts to remain publicly viewable and auditable, giving market participants and regulators the ability to inspect the code governing trades and liquidity pools. Yet the people and firms interacting with those contracts would be subject to permissioning and compliance checks.
A TSV must be formed in the United States and maintain a U.S. office, excluding offshore operators from the exemption. Platforms must also comply with U.S. sanctions requirements and related restrictions on access.
Federal anti-fraud and anti-manipulation laws continue to apply to tokenized stock trading. The order further requires a tokenized stock to halt whenever its underlying NMS security is halted, preventing the blockchain version from becoming a route around a pause in the conventional market.
AMM pools enter a securities-market test
The SEC has allowed qualifying TSVs to use permissioned automated market maker pools for liquidity. An AMM is a smart-contract system that sets trading prices using assets deposited in a pool, rather than relying solely on the traditional model of matching buyers and sellers through an order book.
AMMs are widely used in cryptocurrency markets, though their use for regulated equity trading raises different questions around price formation, liquidity quality, market surveillance, and participant protections. The exemption gives the SEC a period of live-market observation rather than assuming that a model developed for digital assets will operate the same way for listed stocks.
Certain liquidity providers participating in those AMM pools may receive a conditional exemption from broker-dealer registration, provided they satisfy the order’s requirements. The relief is narrow and does not remove the compliance conditions attached to the framework.
The SEC said it would later specify limits on the number of tokenized stocks that each venue may trade and on aggregate trading volumes. Those caps would make the program a controlled test rather than an immediate alternative market for a broad range of U.S. equities.
A temporary route rather than a permanent market structure
During the five-year term, the SEC plans to collect data on on-chain stock-trading volumes, the performance of AMM liquidity pools in securities markets, and the practical effects of issuer objection rights. The agency will also accept public comments.
The eventual outcome remains open. The SEC could use the findings to propose permanent rules, extend or modify its approach through later action, or allow the exemption to expire. TSVs would then need to shut down, register under a different regulatory framework, or materially alter their operations.
For platforms and traders, the order creates a route to experiment with public-blockchain settlement and programmable liquidity while keeping identity controls, issuer consent, and securities-law obligations at the center of the model. It also places tokenized equities on a different footing from freely transferable stock-linked tokens marketed outside U.S. regulatory channels.
Anyone considering a tokenized stock would need to establish whether the token conveys enforceable rights in the underlying company and whether the venue operates under the SEC’s conditions. Under the new exemption, visible blockchain records alone would not determine legal ownership; the token’s structure, the issuer’s position, and the venue’s compliance arrangements would remain central.
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