The U.S. Securities and Exchange Commission has approved a five-year “Innovation Exemption” that will allow certain tokenized U.S. stocks to trade through onchain automated market makers, or AMMs, under a tightly controlled regulatory framework.
The order, issued September 17, creates a new category of Tokenized Securities Venues, or TSVs, that can operate permissioned AMM liquidity pools without registering as national securities exchanges, provided they meet specified conditions. The relief applies to tokenized National Market System stocks, meaning shares already listed on major U.S. exchanges. SEC Chair Paul Atkins described the move as an effort to bring U.S. capital markets “into the digital age” while the Commission considers more permanent rules. The exemption follows the Senate’s failure earlier this week to advance the CLARITY Act, leaving regulators to continue developing crypto and tokenization policy using existing statutory authority.
Tokenized Shares Must Preserve Full Shareholder Rights
The exemption does not permit synthetic stock tokens that merely track an equity’s price. To qualify, a tokenized stock must provide holders with the same rights and privileges as the corresponding traditional share class, including dividend and voting rights. Tokens may be created by the issuer itself or by an unaffiliated third party, but issuers must receive advance notice and be given an opportunity to object before third-party-tokenized versions of their shares begin trading. Trading will occur through permissioned AMM liquidity pools, meaning access can be restricted to approved participants even though the underlying smart contracts must be public, auditable and deployed on a public, permissionless blockchain.
The SEC is also imposing limits on the number of securities and trading volumes permitted under the exemption. Trading in a tokenized stock must halt whenever trading in the underlying share is stopped on its primary exchange, while venues must publicly disclose operational and trading information. The order additionally grants temporary relief from dealer-registration requirements for qualifying liquidity providers that use proprietary capital to supply tokenized shares to AMM pools, subject to disclosure, recordkeeping and other conditions.
Five-Year Test Could Reshape U.S. Equity Market Structure
The exemption is scheduled to expire five years after publication, giving the SEC time to observe how tokenized equities trade before deciding whether to adopt permanent rules. Commissioner Mark Uyeda said the framework is deliberately limited, with transaction transparency, technology safeguards, books-and-records requirements and volume caps designed to let regulators study live onchain markets without immediately replacing the existing exchange structure. The decision could create an opening for crypto platforms, brokerages and traditional exchanges to experiment with blockchain-based stock trading in the U.S. Robinhood and Kraken parent Payward have already pursued tokenized-equity products outside the country, while Nasdaq, NYSE-linked entities and other market infrastructure providers have been exploring tokenization domestically.
The SEC’s framework also addresses one of the biggest criticisms of overseas tokenized-stock products: some existing offerings provide only economic exposure rather than actual shareholder rights. Under the U.S. exemption, eligible tokens must represent genuine ownership rights equivalent to conventional shares. Atkins stressed that the Commission is not declaring today’s AMM model the permanent future of securities trading. Instead, the exemption is intended as a bridge toward broader rulemaking. If adoption grows, the framework could test whether public blockchains can support regulated U.S. equity trading with faster settlement, programmable ownership and potentially extended trading hours while retaining core investor protections. For now, the SEC has moved tokenized stocks from a largely theoretical regulatory debate into a controlled live-market experiment — one that could ultimately influence how American equities are issued, traded and settled.