SEC Advances Tokenized-Securities Exemption That Could Enable 24/7 Trading

The Securities and Exchange Commission is advancing an “innovation exemption” for tokenized listed securities that Chair Paul Atkins says would give market participants a cabined framework to begin facilitating compliant onchain trading while the Commission develops long-term rules. Bloomberg reported Aug. 11 that the measure could pave the way for 24/7 trading of stock tokens on blockchains.

Atkins' public descriptions place the measure before release. In April remarks, he said the SEC was “on the cusp” of releasing the framework. In May, he called it a “forthcoming innovation exemption for tokenized listed securities.” Both speeches carried disclaimers that Atkins was expressing his own views rather than those of the Commission or other commissioners.

The cited speeches do not specify the exemption's legal form, effective date, binding conditions or the particular requirements it would alter. The SEC's Friday meeting agenda does not list the innovation exemption. Its only item is whether to issue a release proposing new rules for “a tailored offering regime for certain investment contracts involving crypto assets,” a separate initiative concerning crypto offerings.

What the Framework Would Address

In a Jan. 28 joint staff statement, the SEC's Divisions of Corporation Finance, Investment Management, and Trading and Markets said a security's format and recordkeeping method do not affect the application of federal securities laws. Every offer and sale must still be registered unless an exemption is available.

Commissioner Hester Peirce made the same point in an earlier statement: “Tokenized securities are still securities.” She said the same legal requirements apply to onchain and offchain versions, including restrictions that can prevent retail investors from trading some synthetic products away from a national securities exchange.

For trading platforms, Atkins has described the intended change only at a high level: the framework would let market participants begin facilitating tokenized-securities trading onchain “in a compliant fashion” as the Commission works on longer-term rules. Bloomberg reported the separate possibility that the exemption could pave the way for continuous stock-token trading. The April and May speeches do not identify which platforms or products would qualify.

The structure also matters for stock issuers. The Jan. 28 joint staff statement distinguishes shares tokenized by a company or its agent from products created by an unaffiliated third party. Third-party products may represent a custodial interest in underlying shares or provide synthetic exposure, and they may not give holders voting, information or other shareholder rights. Some also expose buyers to the third party's bankruptcy risk.

Wall Street trade group SIFMA has urged the SEC to subject an innovation-exemption framework to notice and comment and impose investor limits, transaction caps, duration limits and clearly defined covered activities. It warned that broad relief could create fragmented liquidity, inconsistent pricing and unequal safeguards between conventional and tokenized markets. Those are SIFMA's requested guardrails, not announced SEC terms.

The Commission's scheduled Friday consideration concerns whether to issue a proposing release for the separate crypto offering regime. The published agenda does not include the tokenized-securities exemption.