SEC Exemption Opens Limited Path for Tokenized U.S. Stock Trading

The Securities and Exchange Commission’s temporary Innovation Exemption creates a limited path for permissioned venues to trade tokenized U.S. stocks while the agency develops permanent rules.

The SEC issued the five-year, conditional relief Sept. 17 through an order exempting Tokenized Securities Venues from the Exchange Act’s definition of an exchange. The order also provides limited relief from the definition of a dealer for certain liquidity providers supplying tokenized National Market System stock to automated market-maker liquidity pools.

Eligible venues may use permissioned automated market makers and liquidity pools to bring together buyers and sellers of tokenized NMS stock. The exemptions expire five years after publication.

The order requires tokenized stocks to give holders the same rights and privileges as equivalent traditional shares. Issuers may also object before unaffiliated third-party tokenized stock is traded on a venue.

The relief covers tokenized NMS stocks traded through permissioned venues, rather than unrestricted synthetic assets that merely track U.S. securities. Smart contracts used by the venues must be auditable, public and deployed on a public, permissionless distributed ledger.

“Tokenization is coming, and I would rather it happen here than have overseas markets offer tokenized exposure to U.S. equities without a domestic alternative,” SEC Commissioner Hester M. Peirce said Sept. 23 at the 2026 SIFMA Digital Assets Conference in New York.

The order solicits public comment on possible modifications and future regulatory steps, making the exemption an interim measure as the agency considers longer-term rules.

Peirce also argued that cryptographic tools could potentially reduce the personal information collected during financial compliance checks. She said attribute-based credentials and zero-knowledge proofs could verify age, citizenship, accredited-investor status or sanctions-list status without revealing the underlying information.

Peirce criticized the accumulation of customer and transaction information under know-your-customer and anti-money-laundering requirements, including Customer Identification Programs, Currency Transaction Reports and Suspicious Activity Reports.

SIFMA President and CEO Kenneth E. Bentsen Jr. said the exemption could create parallel markets for tokenized U.S.-listed securities. “The exemption could allow multiple tokenized versions of U.S.-listed securities to trade in parallel, lightly regulated markets,” Bentsen said.