The U.S. Securities and Exchange Commission has issued a five-year Innovation Exemption that allows qualifying trading venues and liquidity providers to operate under temporary registration relief — a move Grayscale Research says could bring offshore tokenized equity activity into regulated U.S. markets while preserving shareholder rights.

Tokenized stocks are blockchain-based representations of traditional equities. The order, issued on Sept. 17, permits limited onchain trading of tokenized stocks under temporary conditions. It covers qualifying trading venues and liquidity providers, requires permissioned participation, and mandates the use of public blockchains. Grayscale Research said the move could connect tokenized equity markets with the regulated U.S. financial system.

SEC Sets Conditions for Tokenized Stock Trading

The SEC order temporarily relaxes two registration requirements for qualifying market participants. Certain trading venues may forgo exchange registration, while qualifying liquidity providers may forgo dealer registration. The exemptions apply only under specific conditions, however.

Transactions must use public blockchains, and participants must receive permission before accessing the trading system. Trading venues must also publish disclosures before beginning operations. Rules against fraud and market manipulation, AML/CFT requirements, and OFAC screening remain fully applicable.

Taken together, the conditions are designed to bring onchain trading under safeguards familiar from U.S. securities markets — pre-launch disclosures, anti-fraud and anti-manipulation rules, and AML/CFT and sanctions screening — while keeping settlement on public blockchain infrastructure.

The relief is capped at five years and includes restrictions on listings and trading volume, keeping the exemption within defined boundaries.

Grayscale Tracks Growth in Tokenized Equities

Grayscale said tokenized equity trading has increased across platforms including Robinhood, BNB Chain, and Solana — a mix spanning retail brokerages and public blockchain networks. Its research noted that much of the current activity takes place offshore through derivative-like wrapper assets.

According to Zach Pandl, Grayscale's head of research, the SEC order could move more tokenized stock activity into regulated U.S. markets. The structure also allows tokenized securities to retain traditional shareholder rights, including voting rights and dividends, when the qualifying tokenized stock meets the order's requirements. That is a practical distinction from the derivative-like wrappers Grayscale described, which typically do not carry the voting and dividend rights of the underlying shares.

As an example, Grayscale described a permissioned Uniswap pool in which approved users could exchange tokenized stocks for stablecoins — an illustration of how permissioned access could work on public blockchain infrastructure.

Paul Atkins Calls Exemption an Interim Measure

SEC Chairman Paul Atkins described the exemption as a temporary measure and said durable rulemaking should follow. The SEC is also seeking public comments on the order and its implementation, giving market participants a formal channel to weigh in before any permanent framework is set.

Grayscale said the exemption represents an initial step for tokenized securities markets. Pandl said the framework could allow blockchain-based trading infrastructure to operate alongside compliance requirements and investor protections.

The order therefore establishes a defined framework for permissioned onchain trading while the SEC considers additional regulatory action. From here, the markers to watch are procedural: the open comment period, the durable rulemaking Atkins said should follow, and the five-year window the current relief.