SEC Grants Five-Year Innovation Exemption for Onchain Tokenized Stock Trading

• The SEC on Sept. 17 issued a five-year Innovation Exemption allowing Tokenized Securities Venues to trade tokenized NMS stocks onchain without registering as exchanges.
• The order also exempts certain liquidity providers from the Exchange Act’s dealer definition.
• Tokens must confer the same rights as traditional shares; synthetics are excluded and issuers may object to third-party tokenization.
• Chair Paul Atkins framed the order as a response after Congress failed to advance the Clarity Act earlier in the week.
• The Commission is soliciting public comment and said durable rulemaking must follow the temporary relief.

The U.S. Securities and Exchange Commission on Thursday granted temporary, conditional relief that lets a new class of onchain platforms trade tokenized versions of listed U.S. stocks without registering as exchanges.

In a Sept. 17 press release, the agency said the so-called Innovation Exemption exempts Tokenized Securities Venues, or TSVs, from the definition of “exchange” under the Securities Exchange Act of 1934. Those venues may offer permissioned automated market makers and liquidity pools for tokenized National Market System stock. The same order temporarily exempts certain liquidity providers that supply proprietary capital to those pools from the Act’s definition of “dealer.” Both grants of relief are set to expire five years after publication.

Chair Paul Atkins tied the move to Congress’s failure earlier in the week to advance the Clarity Act. “Today, the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age,” Atkins said in a accompanying statement. He added that the exemption, while temporary, would allow TSVs to trade tokenized NMS stock “int a permissioned environment today while the Commission considers the need for additional action.” Atkins also wrote that the interim measure “must be followed by durable rulemaking.”

CoinDesk reported that the exemption had been in the works for more than a year and that tokens must represent real ownership, including dividend and voting rights. Synthetics that track a stock’s price without conferring ownership are excluded. Before listing a token created by an unaffiliated third party, a TSV must give the issuer written notice and an opportunity to object. Commissioner Hester Peirce separately noted that issuers who do not want their stock trading on TSVs can opt out, and that the exemptions are available to U.S. persons, including incumbents and new entrants.

Conditions also require TSVs to be U.S. persons, comply with OFAC sanctions, use auditable public smart contracts on a permissionless ledger, halt tokenized trading when the primary listing exchange stops the underlying stock, and observe limits on the number of symbols and volume traded. Anti-fraud and anti-manipulation provisions continue to apply in full. The order solicits public comment on possible modifications as the Commission considers next steps.

The relief does not rewrite market-structure law and does not replace the stalled Clarity Act. For crypto investors and traders, it opens a bounded, permissioned path for secondary trading of tokenized U.S. equities while leaving primary issuance, synthetics, and unregistered exchange activity outside the safe harbor.