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The Securities and Exchange Commission (SEC) has issued a five-year, conditional “Innovation Exemption” that lets Blockchain venues list and trade tokenized US stocks without needing to register as exchanges.
The regulator’s new directive creates a new category known as a Tokenized Securities Venue, or TSV, and changes two definitions that normally apply to it.
A TSV is no longer classed as an “exchange” under the Securities Exchange Act of 1934, and the liquidity providers feeding its pools will not be classed as a “dealer” as defined in section 3(a)(5). Both exemptions would be effective for five years.
Normally, a venue links buyers and sellers of tokenized National Market System stock via permissioned automated market makers and liquidity pools. The SEC does not have to approve each operator one by one; however, any platform that believes it meets the requirements is free to do business after notice is filed.
The conditions platforms must meet under SEC exemption
The SEC put a limit on the number of symbols an operator can list and how much volume it can push through.
Also, if a platform chooses to tokenize a company’s shares without involving that company, a written notice must be sent to the issuer before doing so. A waiting period of 30 days takes effect, and the issuer may refuse to grant approval; if that happens, the token stays off the platform.
The smart contracts also have to be public, auditable, and exist on a permissionless ledger. Also, trading has to stop once the underlying stock is paused on its primary exchange. Chairman Atkins’ statement also made it clear that a TSV has to be a US person and comply with the sanctions programs enforced by the Office of Foreign Assets Control.
One area where the order did not budge is in what does not qualify. The exemption order only applies to tokens backed by real shares, not synthetic derivatives that simply track share price.
Why the SEC is issuing the tokenization exemption now
The order arrives at a critical juncture. It comes shortly after the CLARITY Act, the industry’s landmark bill, fell short of the 60 votes needed to advance it in the Senate. With the bill stuck, the SEC chose to leverage its own powers.
The order is temporary and only runs for five years. It goes into effect immediately and, simultaneously, beckons the public to chime in on how the relief should be altered and what its next steps should be.
The foundation has been laid before now. In May, Nasdaq, the New York Stock Exchange, and the Depository Trust & Clearing Corporation had begun constructing blockchain settlement rails, with the DTCC aiming at production trades of tokenized assets after it received a no-action letter in December 2025.
What’s left unknown
The only question is concerning uptake. SEC officials admitted not knowing how much interest US public companies have in the tokenization of their shares. They claim the new model could benefit public companies in a myriad of ways.
The head of the SEC’s Crypto Task Force, Commissioner Hester Peirce, has warned many not to get carried away, as the exemption order was to be “limited in scope” and is not a get-rich-quick scheme.
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