SEC weighs tokenised equity trading path

Washington regulators are preparing a major shift in digital-asset oversight that could allow tokenised versions of stocks to trade on crypto platforms, opening a new front in the contest between blockchain firms and traditional exchanges.

The U. S. Securities and Exchange Commission is expected to unveil an “innovation exemption” during the week of 18 May, giving selected market participants limited relief from existing securities rules while they test tokenised equities and related trading models. The proposal is being shaped under SEC Chair Paul Atkins as part of a broader attempt by the Trump administration to move digital assets from enforcement-led scrutiny towards rule-based supervision.

The exemption is expected to focus on crypto versions of listed equities, including instruments that track public-company shares but may not carry the same rights as ordinary stock ownership. That distinction is central to the debate. Token holders could receive price exposure to a company’s shares without voting rights, dividend claims or issuer-backed registration on the company’s shareholder records.

Such a framework would mark one of the most significant regulatory openings for tokenised securities in the United States. It would allow crypto-native platforms and established financial firms to test blockchain-based trading, settlement and market-making systems under controlled conditions, rather than waiting for a full rewrite of market structure rules.

The SEC’s own public statements this year have drawn a distinction between issuer-sponsored tokenised securities and tokens created by third parties without the issuer’s involvement. Issuer-backed models generally use distributed ledger technology as an alternative recordkeeping system for the same security. Third-party models are more complex because they can involve custodial claims, synthetic exposure or instruments that may resemble security-based swaps.

That distinction has important implications for investor protection. A token that mirrors Apple, Tesla or Nvidia shares but is issued by a crypto platform may not give the holder the legal position of a shareholder. If the underlying share is held in custody, investors must understand who holds it, how redemption works, what happens during insolvency and whether corporate actions are passed through. If the token is synthetic, the risks can extend to counterparty exposure, derivatives regulation and market manipulation.

The proposed exemption is expected to include limits on trading volume and require users to pass a white-listing process. Such safeguards would be designed to prevent an open-ended bypass of securities-market rules while permitting experimentation with automated market makers, decentralised applications and on-chain settlement. Officials have framed the idea as incremental rather than a wholesale replacement for the existing exchange system.

Traditional market operators are pushing back. Exchange groups have warned that allowing crypto firms to trade stock-linked tokens without the same obligations imposed on national exchanges, broker-dealers and clearing agencies could weaken market integrity. Their argument is not against tokenisation itself, but against regulatory relief that gives one set of platforms a lighter compliance burden while competing for the same investors.

Crypto companies argue that blockchain infrastructure could cut settlement delays, lower operational costs and extend access beyond conventional market hours. Tokenised assets could also be used inside decentralised finance systems as collateral or trading instruments, potentially linking securities markets with a wider on-chain economy. Supporters say these benefits justify a supervised testing regime rather than forcing every new model into rules written for centralised intermediaries.

The policy shift comes as Congress advances wider crypto legislation aimed at clarifying the roles of the SEC, the Commodity Futures Trading Commission and banking regulators. The draft framework would treat tokenised securities broadly in line with the underlying securities they represent, while also requiring further study of tokenised markets. It would also set rules for digital commodity platforms, stablecoin rewards, anti-money-laundering controls and capital raising by crypto projects.

The SEC’s approach has changed sharply from the previous administration, when the agency pursued several enforcement actions against digital-asset firms and treated many token offerings as unregistered securities transactions. Under Atkins, the regulator has signalled a greater willingness to issue guidance, no-action positions and exemptions while developing formal rules.

Major financial institutions are already moving into tokenisation. Asset managers, exchanges and clearing firms have been testing blockchain-based funds, collateral systems and securities settlement models. Nasdaq has also pursued approval for trading and settling certain securities in tokenised form, reflecting a strategy by established exchanges to absorb blockchain infrastructure into regulated markets rather than surrender the field to crypto platforms.