According to a Reuters report, the SEC is preparing an “innovation exemption” for tokenized securities that will allow crypto-native exchanges to list and trade blockchain-based tokens linked to U.S. stocks, bypassing significant portions of the licensing architecture that governs traditional securities markets. The exemption, which was expected as early as May 18, 2026, creates a new regulatory pathway for on-chain trading of tokens linked to publicly traded companies. In some cases, it would allow crypto platforms to operate with lighter requirements and without full broker-dealer licenses.
This follows March and April 2026 approvals for tokenized trading on Nasdaq and NYSE. Where those approvals kept tokenized equities inside existing market infrastructure and clearing rails, the new exemption targets something structurally different: crypto platforms running their own matching, custody, and settlement on public blockchains, entirely outside the DTCC.
The roots of the exemption trace back to Project Crypto, an initiative launched under Chair Atkins in mid-2025 to replace years of ambiguity — stemming from the Gensler era’s enforcement-heavy approach — with clearer rules. The Gensler era (2021–2024) brought aggressive enforcement, including lawsuits against Coinbase and Binance — a strategy that pushed crypto infrastructure development offshore without eliminating it. Atkins has framed the exemption as a mechanism to pull that activity back into U.S. jurisdiction rather than let it operate in legal gray zones from Malta or the Cayman Islands.
The SEC’s case ultimately comes down to how modern markets settle transactions. Traditional equity settlement runs on T+1, routed through DTCC, which charges basis points on trillions in daily volume. Blockchain settlement is near-instant with negligible transaction costs at scale. Ondo Finance completed a cross-border tokenized Treasury settlement involving J.P. Morgan, Mastercard, and Ripple in under five seconds in May 2026 — a benchmark that makes multi-day settlement look like a policy choice rather than a technical constraint.
The regulatory shift is also unfolding against a political backdrop. The Trump administration has explicitly framed blockchain adoption as part of a broader U.S. tech dominance agenda — letting offshore platforms in Dubai or Malta capture tokenized equity volume while U.S. regulators stall is, in Atkins’ framing, a competitiveness failure rather than a prudent regulatory posture. The $32.49 billion tokenized real-world asset market already exists, regardless of whether the SEC formally endorses it; the exemption is an attempt to ensure it operates inside U.S. jurisdiction rather than around it.
The most consequential element of the exemption is the SEC’s reversal on issuer consent. The SEC is moving toward allowing external platforms to tokenize equities without needing approval from the issuing company — a notable departure from its January 28 guidance, which had strictly differentiated between issuer-endorsed tokenization and third-party offerings, cautioning that the latter typically delivered only synthetic exposure rather than genuine equity ownership.
In practice, the process works like this: a platform buys actual shares of a publicly traded company, deposits them with a qualified custodian, and mints blockchain tokens tracking those shares. Those tokens trade 24/7 on a crypto exchange. The issuer has no involvement, no visibility into who holds the tokens, and no obligation to recognize token holders on its official shareholder register.
| Feature | Traditional brokerage share | Issuer-sponsored token | Third-party custodial token |
|---|---|---|---|
| Voting rights | Yes | Yes | No |
| Dividends | Yes | Yes | Typically no |
| Legal ownership | Yes | Yes | Price exposure only |
| Settlement | T+1 | Near-instant | Near-instant |
| Trading hours | 9:30 AM – 4:00 PM ET | 9:30 AM – 4:00 PM ET | 24/7 |
| Counterparty risk | Low (DTCC) | Low | Custodian bankruptcy risk |
| Issuer consent | N/A | Required | Not required |
Many investors see a digital token tied to a listed company and assume they are buying stock in the ordinary sense. In many cases, they are buying price exposure without the governance rights, legal ownership, and shareholder privileges that define traditional equity investing. Robinhood and Kraken disclosures state that certain tokenized stock products do not convey shareholder rights. Regulators are expected to consider imposing guardrails, potentially requiring removal from listing if tokens do not provide core shareholder rights such as voting power or dividends — but whether those survive final rulemaking is still open.
| Area | Before | After | Key players |
|---|---|---|---|
| Regulatory status | Full broker-dealer license required — few crypto firms qualified | Sandbox exemption — lighter licensing during trial period | Coinbase, Kraken |
| KYC / AML | Manual compliance checks per transaction — slow and inconsistent | Compliance logic embedded in smart contracts — enforced automatically at point of transfer | All platforms |
| U.S. retail access | Tokenized equities blocked for U.S. users — Kraken xStocks limited to 110 other countries | 260+ tokenized U.S. equities and ETFs potentially available to domestic retail investors for the first time | Ondo Finance |
| Trading hours | U.S. equity exposure limited to 9:30 AM – 4:00 PM ET | 24/7 equity token trading inside the same crypto wallet — no separate brokerage account needed | Robinhood, Kraken |
| Brokerage competition | Crypto and equity markets on separate rails — no competition for retail equity flow | Coinbase and Kraken compete directly with Fidelity and Schwab for equity order flow without brokerage infrastructure | Coinbase |
The innovation exemption would allow qualifying firms to test tokenized securities on new trading venues, including AMMs and potentially public blockchains, under a defined set of rules. Atkins explicitly discussed embedding compliance checks directly into smart contract code, including resale restrictions and issuer-holder communications. That means a token can be programmed to transfer only between wallets that passed identity verification — without a manual compliance check at each step.
Kraken proved the global viability of tokenized equities by scaling xStocks to $25 billion in volume across 110 countries (last update by Kraken – February, 2026), despite strict jurisdictional bans in the U.S., UK, Canada, and Australia. The structural bottleneck was legacy compliance. Now, as the SEC moves to finalize its historic policy exemptions, the legal pipeline is shifting from an offshore workaround to a fully sanctioned domestic market rail.
The opposition from traditional market participants has a substantive core beyond turf protection. Fragmenting U.S. equity trading across dozens of decentralized protocols simultaneously creates price discrepancy windows — situations where the same stock trades at different prices across NYSE, Coinbase, and a DeFi protocol long enough for arbitrageurs to extract value from retail participants who don’t know the spread exists.
The deeper systemic risk is custodian concentration. If a handful of crypto firms end up holding the physical shares underlying billions in tokens, a bankruptcy or regulatory seizure at one of those custodians becomes a systemic event for token holders who had no direct relationship with that custodian and may not have understood the counterparty structure they were exposed to. Tokenized stocks reached $5.5 billion in value, a fraction of the broader $32.49 billion tokenized real-world asset market — but the exemption is designed to scale that number significantly, which makes the custody question more urgent, not less.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. The information presented reflects publicly available sources at the time of writing and may not account for subsequent regulatory developments. Tokenized securities are subject to evolving SEC rulemaking — consult a licensed financial advisor before making any investment decisions.
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