The U.S. Securities and Exchange Commission has opened a temporary federal pathway for certain forms of on-chain trading in tokenized U.S. equities, granting a five-year “Innovation Exemption” that allows qualified venues to operate permissioned automated market maker pools on public blockchains without registering as national securities exchanges or alternative trading systems.
The order, issued on Sept. 17 under Section 36(a)(1) of the Securities Exchange Act, runs through Sept. 17, 2031, unless the SEC modifies or withdraws it sooner. It targets the trading infrastructure around tokenized shares rather than the issuers of those tokens, leaving existing securities-law requirements for issuance, transfer agents and clearing arrangements in place.
Under the exemption, eligible Tokenized Securities Venues may offer secondary trading in certain tokenized National Market System equities through permissioned AMM pools. Covered liquidity providers using their own capital inside those pools can also avoid dealer registration, provided they satisfy the order’s conditions.
The relief gives U.S.-based firms a more defined route to build blockchain-based stock trading systems, but its tightly drawn limits mean the first products are likely to resemble supervised, low-volume extensions of established securities infrastructure rather than open global markets for every listed stock.
Strict limits on listings and market share
The SEC capped each covered venue and its affiliates at 75 Tier 1 stocks and 250 Tier 2 stocks. Tier 1 includes companies in major indexes such as the S&P 500 and Russell 1000, while Tier 2 covers other qualifying U.S. NMS securities.
Trading activity is also limited relative to conventional market volumes. A venue may handle on-chain volume equal to no more than 0.25% of a Tier 1 stock’s total market volume and 2.5% for Tier 2 names. The calculation uses the prior month’s average daily share volume reported through the securities information processor, or SIP.
Those limits apply across affiliated venues rather than separately to each platform. A company operating several branded products or related trading entities cannot divide activity between them to expand its effective allowance.
A first breach of the volume threshold does not require immediate removal of a stock. Each additional breach triggers a three-month suspension of that security from the venue. The structure gives platforms some flexibility during an initial overage but makes repeated capacity breaches costly, particularly for stocks with thinner trading volumes.
The 75-stock Tier 1 ceiling and 0.25% market-share limit could constrain platforms seeking to offer large catalogs of heavily traded blue-chip shares. By comparison, offshore tokenized-stock products have often marketed access to hundreds of securities, though many use legal structures that would not satisfy the SEC’s shareholder-rights requirements.
Token holders must receive stockholder rights
The SEC’s conditions require tokenized shares traded under the exemption to carry the same core rights as conventional common stock. Those rights include dividends, voting rights and residual claims in a liquidation.
That requirement sets the framework apart from products that offer only economic exposure to a stock through a note, derivative or special-purpose vehicle. A token designed to track the price of a share without providing legal shareholder rights would not meet the order’s terms for trading on a covered venue.
Issuers also have a way to challenge unauthorized third-party tokenizations. A venue must provide written notice at least 30 calendar days before listing a tokenized stock without issuer authorization. The issuer can block the listing through a written objection during that period.
The process gives public companies a formal role in determining whether tokenized versions of their shares may trade on participating platforms. It could make issuer relationships, corporate-action processing and shareholder-record management central competitive issues for tokenization firms.
AMMs allowed, order books excluded
The exemption is narrowly structured around automated market makers, where liquidity is supplied to smart-contract pools rather than matched through a conventional order book. Smart contracts must be public and auditable, and they must operate on a public, permissionless distributed ledger.
Venues may support non-binding indications of interest, including request-for-quote messaging. A standalone on-chain central limit order book, where buy and sell orders are continuously matched at quoted prices, falls outside the mechanism described in the order.
That distinction may force adjustments by companies whose tokenized-equity operations are built around order-book trading. Dinari, for example, has transfer agent and broker-dealer registrations and operates its dShares product through a custody-backed structure, but its network uses an order-book model. Its stated U.S. availability has also been limited.
The SEC’s design places the initial emphasis on a specific on-chain market structure rather than granting general permission for blockchain-based equity trading. AMMs can provide continuous quoted liquidity, although they also require careful management of pricing, pool depth and blockchain transaction costs.
Permitted trading pairs are limited
Eligible tokenized stocks can trade against another tokenized stock, a non-security crypto asset such as a payment stablecoin issued under the GENIUS Act, or a tokenized money market fund. Direct pairing with Bitcoin or other assets outside those categories is not permitted by the order.
The rules also prohibit leverage, margin, financing, lending and rehypothecation within a compliant venue. Liquidity pool assets cannot be reused as collateral for borrowing or similar arrangements.
Venues must operate as U.S. entities, comply with Office of Foreign Assets Control sanctions requirements, provide public trade data free of charge within 10 minutes, and distribute specified issuer communications and proxy materials to holders without charge. Liquidity providers are barred from holding or custodying customer assets.
Primary issuance is excluded, reinforcing that the exemption addresses secondary-market trading rather than a new method for companies to sell stock to the public.
Established regulated firms may have an advantage
Because the SEC did not waive token issuance requirements, firms combining transfer-agent, broker-dealer and ATS capabilities are better positioned to supply shares that can reach covered venues.
Securitize has SEC-registered entities for transfer agency, broker-dealer, ATS, investment adviser and fund-administration functions. The company reported partnerships with Computershare and Continental Stock Transfer in 2026, relationships that could help address shareholder-record and corporate-action requirements.
Ondo acquired Oasis Pro to obtain broker-dealer, ATS and transfer-agent capabilities. It received FINRA authorization in July to offer tokenized NMS stocks to U.S. institutions and retail clients, according to the company. Ondo has also joined DTCC Fund/SERV as a tokenization-platform member, although its catalog of more than 440 tokens exceeds the exemption’s per-venue listing limits.
Superstate and Galaxy demonstrated a different approach in September 2025 by bringing Galaxy Digital’s GLXY shares to Solana while updating the official shareholder register in real time. Bullish tokenized its BLSH shareholder register in May through transfer agent Equiniti and is pursuing an acquisition of Equiniti expected to close in January 2027.
Offshore stock tokens face a different standard
Several prominent offshore products would require substantial changes to qualify under the SEC’s conditions. Robinhood’s Stock Tokens used a Jersey special-purpose vehicle to issue tokenized debt securities representing economic exposure to around 200 stocks. The product did not provide ordinary shareholder voting rights and excluded U.S. users.
Kraken’s xStocks, which reported cumulative volume above $35 billion across more than 700 assets, states that holders do not have voting rights or legal claims to underlying shares. Ondo Global Markets has similarly used a BVI-issued structured-note model in which holders are creditors rather than shareholders.
The SEC staff has indicated that the first venues using the exemption could appear in the fourth quarter. Their early rollout will be defined less by the number of tokenized stocks available than by whether platforms can integrate shareholder rights, issuer approvals, public smart-contract standards and conventional securities compliance into a workable on-chain trading system.
Want deeper context on this SEC move? Explore how tokenized equities work on-chain under evolving regulation today.
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