SEC Greenlights Temporary Framework for Trading Tokenized U.S. Shares on Public Blockchains

The U.S. Securities and Exchange Commission (SEC) has approved a temporary pathway for tokenized shares to trade on public blockchains, setting up a limited trial even as the Senate recently failed to move forward with the CLARITY Act. The move allows the SEC to advance a narrow slice of the crypto policy agenda that remains stalled in Congress. Under the SEC's Innovation Exemption, approved participants will be able to trade blockchain-based versions of shares listed on U.S. exchanges. These tokens are expected to carry the same core economic and governance rights as traditional shares, including voting rights, dividend rights, and claims on remaining corporate assets in a liquidation. The framework could allow trading outside regular market hours with faster settlement, and may enable investors to custody tokenized shares in eligible digital wallets instead of standard brokerage accounts. Participation is not open-ended: users must be approved by platform operators and comply with sanctions and applicable rules. Issuers can prevent unaffiliated third parties from tokenizing their shares, and trading must stop if the underlying stock is halted. The exemption also bars initial share offerings through this route, as well as margin and other forms of borrowed trading. Limits apply to activity and symbols: for large-cap U.S. stocks, trading is capped at 75 symbols and 0.25% of the prior month's average daily volume. For less actively traded shares, the cap is 250 symbols with a 2.5% volume ceiling. No venue can launch immediately; operators must publish detailed disclosures at least 30 days before going live. The approach mirrors a key concept in the CLARITY Act's tokenized securities section: putting a share on a blockchain does not change its status as a security. The SEC order keeps tokenized shares within securities law, while granting trading facilities temporary relief from registering as traditional exchanges. The order does not replace broader legislation and leaves major questions unanswered, including how oversight is divided between the SEC and the CFTC, what long-term rules apply to crypto exchanges, and whether any implications extend to DeFi. The exemption is scheduled to expire on September 17, 2031, unless the SEC amends it earlier. The order also does not address tax treatment; separate legislation such as the Digital Asset Tax Certainty Act could clarify how stablecoins used to purchase these shares are treated. In effect, the SEC has authorized a five-year, permissioned pilot for trading tokenized versions of real U.S. equities, while broader regulatory and tax frameworks remain unresolved.