SEC Clears Tokenized Stocks To Trade Onchain As CFTC Widens Software Relief

The two U.S. market regulators issued crypto exemptions within hours of each other on Thursday, the first concrete use of the existing authorities both chairmen invoked after the Senate refused to take up the market structure bill.

The Securities and Exchange Commission (SEC) granted temporary, conditional relief from the definition of “exchange” to a new category it calls a Tokenized Securities Venue (TSV), allowing tokenized National Market System (NMS) stock to trade onchain through permissioned liquidity pools. The Commodity Futures Trading Commission (CFTC) issued a no-action position through its Market Participants Division, telling passive software providers they need not register as introducing brokers.

Neither instrument came from Congress, and neither is permanent. The SEC order expires five years after publication and the Commission can amend or withdraw it before then. A staff no-action position binds only the division that wrote it. The Senate rejected cloture on the motion to proceed to H.R. 3633 by 49-50 on Tuesday, 11 votes short of the 60 required, and The Defiant reported the result.

“Congress was unsuccessful in advancing the CLARITY Act despite the tireless efforts of many,” SEC Chairman Paul Atkins said in a statement accompanying the order. The Commission is “taking a significant step forward, within its statutory authority, to bring America's capital markets into the digital age,” he said, adding that “this interim measure must be followed by durable rulemaking to ensure that onchain markets remain a viable pathway.”

Caps, Tiers And Halts

The order, Release No. 34-106402, exempts venues from the exchange definition in Section 3(a)(1) of the Securities Exchange Act and exempts certain liquidity providers from the dealer definition in Section 3(a)(5). It grants no relief from the antifraud provisions, from Office of Foreign Assets Control sanctions compliance, or from Securities Act registration for primary offerings, and it permits no primary issuance.

Trading is capped. A venue may list 75 Tier 1 symbols, defined by the Limit Up-Limit Down Plan as S&P 500 and Russell 1000 stocks and certain exchange-traded products, and may trade up to 0.25% of the prior month's average daily share volume in each. Tier 2 covers the remaining NMS stocks, at 250 symbols and 2.5% of average daily volume. Breaching a volume cap triggers a three-month pause in that security.

Venues must run publicly auditable smart contracts on public ledgers, halt trading in a tokenized stock whenever the primary listing exchange halts the underlying, and publish 30 days of dollar-denominated transaction data in machine-readable form, updated within 10 minutes, covering symbol, price, size, time and direction. A venue must notify the Commission at tradingandmarkets@sec.gov within one business day of publishing its notice that it intends to operate under the exemption. Participants remain subject to SEC and self-regulatory organization registration requirements where those apply.

“Today's approval of exemptive relief for on-chain secondary trading on a TSV — known as the ‘Innovation Exemption’ — marks an important milestone for the Commission's work to open our capital markets for tokenized securities,” said Jamie Selway, director of the SEC's Division of Trading and Markets, who laid out the framework and the agencies' harmonization work earlier this year.

Issuers Get A Veto

The order covers stock tokenized by the issuer and stock tokenized by an unaffiliated third party. It excludes instruments in which “a third party issues a crypto asset representing its own security that provides synthetic exposure to an underlying security, such as a tokenized linked security or a tokenized security-based swap.”

Before listing a stock tokenized by a third party, a venue must send written notice to the issuer's principal executive offices, at the address on the cover page of its Exchange Act reports, and cannot start trading for at least 30 calendar days from the date the issuer receives it. A written objection filed on or before the 30th day bars the listing. The venue then has five business days to amend its public notice to say it has received a Notice of Issuer Objection. Tokenized shares must carry the same dividend rights, voting rights and claim on residual assets as the underlying stock, and third-party tokenizers must distribute proxy materials at no cost to the issuer or shareholders.

Commissioner Hester Peirce drew the boundary in a separate statement. “This order is not about decentralized finance,” she said. “Truly decentralized systems that are driven by automated software do not give rise to the foundational concerns underlying securities regulation.” She added that “an investor does not need an exemption to avail herself of permissionless smart contracts that mediate peer-to-peer trading,” and that the Commission is open to models other than the one the order describes.

Commissioner Mark Uyeda said the relief will let the agency observe the venues before writing long-term rules. “The Commission should not impulsively attempt to limit emerging technologies by contorting them into legacy legal frameworks,” he said.

Uniswap Labs launched Permissioned Pools on v4 in July, the permissioned automated market maker architecture the order contemplates. Uniswap's UNI token traded at $7.37 on Thursday afternoon, up 19.8% over 24 hours, according to CoinGecko. Bitcoin was at $76,558, up 1.2%.

The Phantom Path Widens

The CFTC action extends a position the agency first gave one company. Staff Letter 26-25 tells providers of passive software they will not be recommended for enforcement over failure to register as introducing brokers under Section 4d(g) of the Commodity Exchange Act, and covers their personnel under the associated-person requirement in Section 4k(1).

The letter defines a passive software provider as a firm that develops and distributes front-end interface software letting users submit orders directly to registered futures commission merchants, introducing brokers and designated contract markets, without the provider taking part in individual transactions. Ten conditions apply, among them disclosure of the provider's relationships with brokers and any conflicts, risk disclosure statements, compliance policies matching those of a registered introducing broker, a written undertaking establishing joint liability with the broker, and consent to Commission investigation.

The position follows Staff Letter 26-09, granted to Phantom Technologies in March. Only the beneficiary of a no-action letter may rely on it, so other providers must meet the conditions in the new letter.

“In March, Phantom became the first passive software provider to receive no-action relief from the CFTC,” Phantom co-founder and CEO Brandon Millman said in a statement. “Now the CFTC has opened that same path to other software providers, and that's a win for the whole industry.”

Parallel But Unequal

Industry groups that spent Tuesday absorbing the Senate vote welcomed the SEC order and said they would file comments.

“Blockchain Association welcomes the SEC's Innovation Exemption as a critical step toward modernizing U.S. capital markets and creating a pathway for responsible financial innovation to take place onchain,” CEO Summer Mersinger said in a statement. The Commission “is recognizing that new technologies and market structures can require fit-for-purpose regulatory treatment,” she said.

Crypto Council for Innovation CEO Ji Hun Kim said the order “keeps this activity inside the U.S. regulatory perimeter, and reflects the Commission's proven historical approach: targeted exemptive relief to accommodate innovative technology while comprehensive rules develop, the same model that built the ATS [alternative trading system] and ETF [exchange-traded fund] markets we have today.”

Robert Leshner, CEO of Superstate and founder of Compound, posted that the order “will open the door to the first onshore, compliant, 24/7 tokenized stock trading.” Superstate, an SEC-registered transfer agent, says it helped shape the Permissioned Pools standard on Uniswap v4. “I expect over the coming weeks and months we'll see issuers rethink products to conform with these rules,” Leshner said.

The Securities Industry and Financial Markets Association argued against broad relief in a letter to the SEC on Nov. 26, 2025, signed by president and CEO Kenneth Bentsen. Broad or categorical exemptions “risk creating parallel, but unequal trading ecosystems,” the group wrote, and entities performing functions substantially similar to traditional securities intermediaries should face the same oversight. SIFMA said it could support an innovation exemption carrying investor caps, transaction limits, duration restrictions and notice-and-comment procedure.

The SEC is soliciting comment on modifications to the exemption and on next steps. The order will be published on SEC.gov and in the Federal Register, which sets the comment deadline. The agency's Regulation Crypto Assets proposal, covering offering exemptions for crypto asset issuers, takes comments until Oct. 20.