SEC Grants Five Year Innovation Exemption for Tokenized US Stock Trading

The U.S. Securities and Exchange Commission on September 17, 2026 issued a conditional exemptive order that opens a regulatory path for tokenized American stocks to trade on blockchain based venues. The order, which the agency calls the Innovation Exemption, gives qualifying platforms a five-year exemption from being treated as a stock exchange under the Securities Exchange Act of 1934, and it took effect immediately.

The exemption applies to entities the SEC describes as Tokenized Securities Venues, or TSVs, which match buyers and sellers of tokenized National Market System shares through permissioned automated market makers and liquidity pools. Under the order, a platform that believes it meets the definition can begin operating after filing a notice with the agency.

The policy lands two days after the Digital Asset Market Clarity Act failed to advance in the U.S. Senate, leaving the SEC to define the boundary of tokenized securities regulation through its existing authority rather than through new legislation from Congress.

SEC Chair Paul S. Atkins framed the order as a limited and temporary step. Atkins said the agency is not freezing today's technology into tomorrow's standard, and he warned that the temporary measure must be followed by durable rulemaking. The exemption expires five years after issuance, and the SEC is seeking public comment on every aspect of the order.

Key Facts

Quartz reported on September 17 that the SEC issued the order to give trading venues a five-year conditional exemption so they can facilitate trading of tokenized U.S. listed stocks without falling under the Exchange Act definition of an exchange. The same report said the exemption is not unconditional: TSVs face caps on the number of tickers they may list and on the trading volume they may handle.

CNBC reported on September 17 that the order establishes a regulatory channel for certain venues to issue tokenized representations of publicly traded U.S. shares, and that it took effect immediately. The report identified two conditions that became the focus of debate among investors: token holders must retain the same rights they would hold in the traditional stock, and companies must be able to object to the tokenization of their securities. CNBC also reported that the five-year exemption is part of Project Crypto, an initiative the agency launched in July 2025, and that the measure is meant to open market activity, inform eventual rules and help Congress judge whether new legislation is needed.

The American Bazaar reported on September 17 that the SEC also granted a five-year exemption from dealer registration requirements to certain liquidity providers that participate in the tokenized stock market. The report said the order covers certain tokenized National Market System stocks and permits trading through permissioned automated market makers and liquidity pools, subject to investor protection and market integrity conditions.

Under the order, a TSV must verify that a tokenized stock gives holders the same rights and privileges as the corresponding traditional security, including dividends and voting rights, on a 1:1 basis. When a token is created by an unaffiliated third party, the platform must notify the issuer before listing the tokenized version, and the issuer gets a chance to object; if the issuer objects within the 30-day window, the platform may not list the token. The SEC also requires smart contracts used by qualifying venues to be auditable and deployed publicly on public, permissionless distributed ledgers.

The exemption excludes synthetic tokens that provide stock exposure through derivatives or other products rather than representing the underlying security. Tokenized stocks traded through these venues face caps on the number of securities and on trading volume, and trading must stop when the underlying stock is halted on its primary listing exchange.

Analysis

The bigger picture here is that the SEC is choosing a conditional, time limited experiment over a comprehensive rulebook. Atkins acknowledged that the policy has an inherent expiration date and said it must be followed by durable rulemaking. The design reflects a compromise: the agency opens the door to on chain trading of U.S. equities while keeping the exemptions narrow enough to be withdrawn if the market misbehaves.

Much of the framework rests on issuer consent and equivalent rights. AMC CEO Adam Aron argued publicly that creating exposure to AMC stock without the company involved would damage the traditional relationship between a company and its shareholders. The order answers that complaint with the 30-day notice and objection window, which gives issuers a veto over tokenization of their own shares. The open question is whether a veto built into an exemptive order will satisfy companies that want a clearer statutory answer.

Robinhood said this week that it is working to address those concerns, and it plans to let holders of stock tokens redeem them 1:1 for the underlying shares and to add voting rights. That concession suggests the industry expects the rights condition to be enforced rather than treated as a formality. Coinbase has said it plans to launch tokenized stocks in the United States when regulation allows, while Robinhood, Kraken and Gemini have already offered tokenized stock products offshore, according to The American Bazaar, which cited Reuters.

What this really means is that the venue exemption tests whether tokenized equities can attract real order flow under U.S. rules without forcing the underlying issuers, or the exchanges where their shares trade, to rebuild the market structure. If the experiment works, the SEC will have evidence for permanent rules; if it does not, the five-year clock runs out and the platforms return to the offshore model that Coinbase, Robinhood, Kraken and Gemini have used so far.

Why It Matters

The order matters because it moves tokenized U.S. equities from offshore venues toward regulated American trading. Supporters of tokenization point to potential benefits that include round the clock trading, faster settlement, lower trading costs, fractional ownership and direct investor holding of assets, and the SEC itself mentioned potential benefits tied to self custody and transparency. If the exemption produces liquid markets with the same investor protections as conventional equities, it could influence how other jurisdictions treat tokenized securities.

It also matters for market structure because the order leaves the core plumbing of the equity market in place. The tokens represent National Market System stocks, and trading must halt when the underlying shares halt. Holders keep dividends and voting rights. Those conditions are designed to prevent a parallel market in U.S. equities from developing with weaker claims than the shares it mimics, which is why the exemption is described as conditional rather than as a new regime.

For the crypto industry, the timing is significant. The failure of the Clarity Act in the Senate came on a procedural vote of 49 to 50, which left supporters 11 votes short of the 60-vote threshold and removed the legislative route to market structure rules for digital assets, including tokenized securities. The SEC is now using its existing authority to define that boundary, and the Innovation Exemption is the clearest signal yet of where the agency draws it.

Next Up

Quartz reported on September 17 that the SEC is taking public comment on the order and on possible modifications or further regulatory action. The exemption expires five years after issuance, which puts the burden on the agency and on Congress to decide whether tokenized equities need permanent rules before the clock runs out. Atkins has said the temporary measure must be followed by durable rulemaking, so the next phase will test whether the SEC can convert a five-year experiment into a lasting framework.

In the meantime, platforms that believe they qualify as Tokenized Securities Venues can file notice with the SEC and begin operating. Coinbase, Robinhood, Kraken and Gemini are among the companies most likely to test the new path, and their decisions will show how quickly tokenized U.S. stocks move from offshore products to American trading venues.