The US Securities and Exchange Commission has granted a five-year conditional exemption, known as Innovation Exemption, for the limited trading of tokenized stocks on specific on-chain platforms. These Tokenized Securities Venues (TSV) can now facilitate trading of NMS stocks via automated market makers and liquidity pools.
Under the new rules, token holders must receive the same rights as owners of traditional shares, including voting and dividend rights. Synthetic instruments that merely track asset prices without providing ownership rights are excluded from this regulatory relief. Issuers retain the right to object to the tokenization of their shares by third parties.
The SEC has imposed volume and instrument limits tied to existing Limit Up-Limit Down market mechanisms. Platforms are required to publish transaction data, including price, volume, and time, while ensuring smart contracts are public and auditable. Trading on TSV must halt if the underlying stock is suspended on a primary exchange.
This exemption does not reclassify tokenized stocks as non-securities; federal anti-fraud and anti-manipulation laws remain fully applicable. The SEC intends to use data collected during this five-year period to inform future long-term regulatory frameworks for on-chain trading and has requested public comments on the process.
