The U.S. Securities and Exchange Commission (SEC) has opened a limited compliant pathway for tokenized U.S. stocks. Under the arrangement announced on September 17, eligible platforms for tokenized securities may receive a conditional exemption permitting certain tokenized U.S. stocks to trade on public blockchains, with the pilot program running until September 2031.
Permissioned AMMs can be used to match trades.
This arrangement applies to "Tokenized Securities Trading Venues" (TSVs). Under exempt conditions, such platforms may not be treated as traditional "exchanges," provided they trade specific U.S. National Market System stock tokens through licensed automated market makers (AMMs) and liquidity pools.
SEC Chairman Paul Atkins stated that this step aims to help U.S. capital markets adapt to digital infrastructure. Regulators also emphasized that this is a transitional arrangement that will serve as a reference for longer-term formal rules.
Third-party tokenization requires an objection period for the issuer.
The SEC permits two types of tokenization models: one where the stock issuer issues tokens directly, and another where tokenization is performed by an unrelated third party. If a platform intends to list third-party-tokenized stocks, it must first notify the corresponding publicly traded company and provide a 30-calendar-day period for objections.
If the issuer raises an objection, the token will not be eligible for trading under this exemption framework. This means that third-party tokenization is not fully open, and listed companies retain the right to prevent related tokens from entering the pilot market.
The quantity of the underlying asset and the trading volume are both capped.
On trading volume, the SEC has set clear limits. Tier 1 may include up to 75 stocks, typically comprising S&P 500 and Russell 1000 components, as well as certain exchange-traded products. The trading volume for each security must not exceed 0.25% of its average daily volume in the prior month.
- Tier 1: Up to 75 underlying assets, with a maximum trading volume limit of 0.25% per asset
- Tier 2: Up to 250 codes, with a maximum single-trade volume limit of 2.5%
- Overlimit handling: Trading will be suspended for 3 months upon trigger.
Tier 2 applies to other National Market System stocks. If a security exceeds the upper limit, trading of the associated token will be suspended for three months. If the underlying stock is halted on its primary exchange, the tokenized version must also be halted simultaneously.
Smart contracts must be public, and data must be auditable.
The SEC requires that the smart contracts supporting TSV be deployed on a public, permissionless distributed ledger and remain publicly auditable. Although transaction access is permissioned, the underlying contracts and transaction data must be transparent.
The platform must also disclose its operational status, trading activities, and related-party activities, and make trade data available in a machine-readable format, including code, price, quantity, time, and buy/sell direction. Liquidity providers who use their own funds to provide liquidity for tokenized stocks in AMM pools may also qualify for a temporary exemption from the “dealer” definition, subject to certain conditions.
The SEC also indicated that existing anti-fraud, anti-manipulation, and sanctions compliance requirements continue to apply. This means the new channel does not operate outside the existing securities regulatory framework but instead creates room for experimentation with on-chain securities trading within the established rules.
Additional information: This "innovation exemption" will expire in September 2031. The SEC has sought public input on potential future modifications and long-term regulatory frameworks; meanwhile, Nasdaq is also advancing extended trading hours, indicating that the U.S. is simultaneously testing on-chain trading and extended trading hours as part of its market infrastructure.