SEC Starts Time-Limited Pilot Allowing Tokenized U.S. Stocks to Trade On-Chain Through 2031

CoinDesk reports that the U.S. Securities and Exchange Commission has created a narrow, compliant pathway for tokenized U.S. equities, launching a pilot that runs through September 2031. Under the framework announced September 17, qualifying platforms—defined as "Tokenized Securities Trading Venues" (TSVs)—may receive a conditional exemption that allows certain tokenized U.S. stocks to trade on public blockchains, with permissioned automated market makers (AMMs) able to match trades. The SEC said TSVs operating under the exemption would not be treated as traditional "exchanges" as long as they limit activity to specified U.S. National Market System stock tokens and route trading through licensed AMMs and liquidity pools. SEC Chairman Paul Atkins said the move is intended to help U.S. capital markets adapt to digital infrastructure. Regulators described the pilot as a transitional measure designed to inform longer-term rulemaking. The agency outlined two tokenization models: (1) tokens issued directly by the public company, and (2) tokens created by an unrelated third party. For third-party tokenization, a TSV seeking to list a token must notify the relevant public issuer and provide a 30-calendar-day objection window. If the issuer objects, the token cannot trade under this exempt framework, effectively giving listed companies a veto over third-party tokens entering the pilot. Both the number of underlying assets and trading activity are capped. The SEC set tiered limits: - Tier 1: Up to 75 underlying assets (typically S&P 500 and Russell 1000 components plus certain exchange-traded products), with token trading for each security capped at 0.25% of that security's average daily volume in the prior month. - Tier 2: Up to 250 codes, with a maximum single-trade volume limit of 2.5%. If a token exceeds the applicable limit, trading in that token must be suspended for three months. If the underlying stock is halted on its primary exchange, the tokenized version must be halted at the same time. The SEC also imposed transparency and auditability requirements. Smart contracts supporting TSV activity must be deployed on a public, permissionless distributed ledger and remain publicly auditable. While access to transact may be permissioned, the contracts and transaction data must be transparent. TSVs must disclose operating status, trading activity, and related-party activity, and provide trade data in a machine-readable format, including code, price, quantity, time, and buy/sell direction. Liquidity providers using their own capital to supply AMM pools for tokenized stocks may qualify for a temporary exemption from the "dealer" definition, subject to conditions. The SEC emphasized that existing anti-fraud, anti-manipulation, and sanctions compliance obligations still apply, positioning the pilot as an on-chain experimentation channel inside the current securities regulatory perimeter. The "innovation exemption" is scheduled to expire in September 2031. The SEC is seeking public input on potential changes and the long-term regulatory framework. The report also notes that Nasdaq is progressing work on extended trading hours, signaling parallel testing of on-chain trading and longer market sessions as part of U.S. market-infrastructure modernization.