The SEC has drawn a clear regulatory line for tokenized securities, affirming that crypto-based formats remain fully subject to federal securities laws while signaling regulatory support for compliant onchain issuance and trading models.
SEC Clarifies How Federal Securities Laws Apply to Tokenized Securities
The U.S. Securities and Exchange Commission (SEC) provided regulatory clarity on crypto-based instruments. The SEC’s Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets jointly issued a statement on Jan. 28, 2026, outlining how federal securities laws apply to tokenized securities.
The statement explains:
“A tokenized security is a financial instrument enumerated in the definition of ‘security’ under the federal securities laws that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.”
It details issuer-sponsored models that integrate distributed ledger technology into official ownership records and emphasizes that technology does not alter legal obligations, noting that “the format in which a security is issued or the methods by which holders are recorded does not affect application of the federal securities laws.”
The SEC further clarifies registration requirements, stating that “regardless of its format, the Securities Act requires that every offer and sale of a security must be registered with the Commission unless an exemption from registration is available.”
The statement also addresses third-party tokenization models, including custodial and synthetic structures that may not convey ownership rights in the underlying securities. It cautions that “holders of the crypto asset may be exposed to risks with respect to the third party, such as bankruptcy, to which a holder of the underlying security would not necessarily be exposed,” and explains that “a security-based swap typically does not convey to the holder any equity, voting, information, or other rights with respect to the referenced security.” The SEC stresses substance over form, stating that “the economic reality of the instrument rather than the name given to the instrument determines whether it is excluded.”
Read more: SEC Chair Outlines Project Crypto Priorities on Token Rules and Governance
Industry participants responded publicly, with digital securities firm Securitize sharing on social media platform X: “We welcome the SEC’s thoughtful statement on tokenized securities, recognizing native, issuer-supported tokenization and onchain recordkeeping as a modern extension of securities infrastructure. Clear frameworks like this are key to responsibly scaling tokenization.”
Coinbase Chief Legal Officer Paul Grewal shared his reaction on social media platform X, writing:
“It’s happening. What an excellent preview by SEC of how tokenized equities can be issued for onchain trading. You are going to see these products in market with the support of a regulator that understands the importance of these innovations to US competitiveness.”
The divisions concluded by indicating readiness to engage with market participants navigating compliance as tokenized securities activity grows.
FAQ ⏰
- What did the SEC clarify about tokenized securities?
The SEC said tokenized securities remain subject to federal securities laws regardless of crypto-based format. - Do tokenized securities require SEC registration?
Yes, the SEC stated all offers and sales must be registered unless an exemption applies. - How does the SEC view third-party tokenization models?
The SEC warned they may not convey ownership rights and can expose holders to added risks. - How did Coinbase respond to the SEC statement?
Paul Grewal said the guidance previews regulated onchain trading of tokenized equities.