SEC opens five-year pathway for tokenized U.S. stock trading

A regulatory sandbox reaches public equities

The Securities and Exchange Commission on Thursday created an immediately effective route for eligible venues to trade blockchain representations of publicly listed U.S. shares. The conditional relief lasts five years and lets qualifying platforms avoid registration as national securities exchanges while regulators observe the new market structure.cnbc +1

The order is deliberately narrower than a general approval of stock-linked crypto products. Tokens must represent ownership of the underlying shares and carry the same dividend, voting and other shareholder rights as conventional stock; synthetic products that merely track a share price are excluded.crypto +1 An issuer must receive 30 days’ notice before a third party tokenizes its shares and can block the listing by objecting.cnbc

Permissioned markets with public guardrails

Eligible tokenized-securities venues may use automated market makers and liquidity pools, mechanisms more familiar in crypto markets than on U.S. exchanges. Their smart contracts must be public and auditable, while access to the trading system remains permissioned. The framework also caps the number of symbols and trading volume, requires operational disclosures and obliges a venue to stop trading a token when the primary exchange halts the underlying stock.crypto

Those constraints seek to preserve the legal substance of share ownership while testing different trading rails. Coinbase, Robinhood, Gemini and Kraken already offer forms of tokenized equities outside the United States, but the exemption does not automatically approve any company’s U.S. service.cnbc +1 Platforms still have to meet the SEC’s eligibility conditions and provide notice before beginning operations.coindesk

Longer hours bring new market risks

The policy could support faster settlement, fractional access and eventually round-the-clock trading. At an SEC event in Washington on the same day, Chair Paul Atkins said tokenization could improve real-time inventory management and reduce settlement failures.coindesk Commissioner Hester Peirce warned that longer hours could also mean wider spreads, more volatility, thinner human oversight and less time to manage technology failures.coindesk

The action also shows the agency using existing authority after a broad crypto market-structure bill failed to advance in the Senate.cnbc +1 It follows a separate SEC proposal for tailored crypto fundraising exemptions, another sign that the regulator is building activity-specific pathways rather than treating every digital-asset business alike.thinkadvisor Because Thursday’s relief is temporary and can be changed more easily than legislation or a final rule, its longer-term importance will depend on whether venues attract meaningful liquidity without weakening investor protections.