The U.S. Securities and Exchange Commission (SEC) issued a five-year Innovation Exemption on September 17, allowing qualifying venues to trade tokenized U.S.-listed stocks through permissioned automated market makers and liquidity pools without registering as national securities exchanges.

The framework covers tokenized National Market System (NMS) stocks and grants separate temporary relief from dealer registration to qualifying liquidity providers that use proprietary capital. SEC Chair Paul Atkins called the order a step toward bringing U.S. capital markets "into the digital age." The decision came after the Senate blocked the CLARITY Act, a digital asset market-structure bill, in a 49-50 procedural vote earlier this week.

The SEC action comes as Washington advances digital asset policy on several fronts. A day earlier, the House Financial Services Committee advanced the Strategic Bitcoin Reserve bill in a 28-21 vote, moving forward legislation that would place qualifying federally held Bitcoin under Treasury custody with a 20-year holding requirement.

The order is also structured as a time-limited framework rather than a permanent rule change: the exemption runs for five years, and the SEC released it alongside a request for public comment, giving venues, issuers and investors a formal channel to weigh in while tokenized trading operates.

Tokenized Shares Must Carry Full Stockholder Rights

Eligible tokens must represent actual NMS stocks and provide holders with the same rights and privileges as the corresponding conventional shares, including dividends, voting rights and residual claims in a liquidation. Synthetic products that merely track a stock price without conveying those rights are excluded.

The restriction matches the narrower approach the SEC outlined earlier this year, when Commissioner Hester Peirce drew a line between tokenized shares and synthetic exposure. Primary offerings cannot use the exemption, which applies to secondary-market trading only.

Companies also retain control over unaffiliated third-party tokenization. A venue must notify an issuer at least 30 days before opening trading in a third-party-tokenized version of its shares, and the issuer can block the listing by submitting an objection during that period.

Volume Caps and Public Blockchain Requirements

The SEC capped Tier 1 tokenized stocks at 75 symbols and 0.25% of the underlying stock's prior-month average daily volume. Tier 2 venues can support up to 250 symbols and 2.5% of average daily volume. Because the thresholds are pegged to each stock's prior-month trading activity, more heavily traded names carry proportionally larger onchain allowances than thinly traded ones. Repeated breaches of a volume threshold trigger a three-month trading pause for the affected tokenized stock.

Smart contracts must be auditable, publicly available and deployed on a public permissionless distributed ledger, while participant access remains permissioned. Trading must also stop whenever the underlying stock is halted on its primary exchange. The SEC identified self-custody, fractional ownership, around-the-clock trading and near-instant settlement among the capabilities the structure could support.

The exemption follows months of work toward onchain stock AMMs and parallel institutional tokenization projects, including a trial by the Depository Trust & Clearing Corporation (DTCC) — the entity that provides post-trade clearing and settlement for U.S. equities — involving JPMorgan, BlackRock and Goldman Sachs.

Tenev and Saylor Back the SEC Move

Robinhood CEO Vlad Tenev said "Tokenization is coming to America", pointing to 24/7 markets, instant settlement and fractional ownership as potential benefits of the new framework. Robinhood already operates tokenized-stock products outside the U.S., although those products use a different structure from the full-shareholder-rights model required under the SEC exemption.

Strategy Executive Chairman Michael Saylor called the decision a "major breakthrough" for digital credit and U.S. capital markets, saying the framework could allow qualifying venues to offer 24/7 onchain trading of tokenized MSTR and STRC to U.S. investors.

The remarks followed his reaction to the failed CLARITY Act vote two days earlier, when he wrote on X, "The only clarity you need is Bitcoin."

How the rollout develops from here will hinge on observable steps: which venues begin trading under the Tier 1 and Tier 2 caps, whether issuers use their 30-day objection window against third-party tokenizations, and what feedback the SEC collects through the comment process during the exemption's five-year term.

Source: Crypto Adventure