SEC Approves Five-Year Innovation Exemption for Onchain Trading of Tokenized U.S. Stocks

The U.S. Securities and Exchange Commission has issued a temporary, five-year exemption that allows certain tokenized U.S. equities to trade on eligible onchain platforms, marking one of the agency's clearest moves to date toward bringing public-company shares onto blockchain rails. Under the order, qualifying "Tokenized Securities Venues" may facilitate secondary trading in tokenized National Market System (NMS) stocks using permissioned automated market makers and liquidity pools. The relief expires five years after publication unless the SEC updates the broader regulatory framework before then. The SEC stressed the exemption is tightly conditioned. Tokenized shares offered through an approved venue must confer the same rights and privileges as the corresponding traditional shares. The agency also set limits tied to ticker symbols and trading volume. Technology requirements feature prominently. Smart contracts used in the trading system must be auditable and publicly available, and they must be deployed on a public, permissionless distributed ledger. Market integrity constraints mirror the traditional market. If the underlying stock is halted on its primary exchange, trading in the tokenized version must halt as well, preventing the creation of a parallel market that sidesteps Nasdaq- or NYSE-listed security rules. For crypto and market-structure firms, the decision provides a structured pathway to test onchain execution for listed U.S. equities while the SEC gathers feedback on what a longer-term framework might look like. SEC officials framed the initiative as an experiment that preserves investor protections rather than a replacement for conventional equity markets. Source: U.S. Securities and Exchange Commission. News Desk; edited by Samuel Rae.