Conditional Five-Year U.S. Exemption Opens Tokenized Stock Trading on Selected Platforms
Key Facts
On September 17, 2026, the U.S. Securities and Exchange Commission issued an order granting a temporary, conditional exemption to selected platforms for trading tokenized stocks, allowing shares listed on distributed ledgers to be traded under SEC rules. The order covers platforms trading tokenized securities, along with certain liquidity providers referred to as covered entities. It exempts eligible platforms from the definition of an "exchange" under the Securities Exchange Act and exempts certain liquidity providers from the definition of a "dealer." The order is not a general authorization for every platform or every on-chain trading activity; eligibility depends on meeting the order's conditions. The SEC set the exemption's duration at five years from its publication date, making the framework temporary and allowing regulators to monitor its implementation before adopting more durable rules.
The order was published in the Federal Register on September 22, 2026, in issue 182, on pages 60168–60184. It requires the smart contracts used by a platform to be auditable and public, and to be deployed on a public, permissionless distributed ledger. The platform must also publish a public notice on its website containing the required disclosures at least thirty calendar days before beginning operations. In frequently asked questions published by the SEC's Division of Trading and Markets on October 20, the division clarified that a platform cannot begin operating or trading tokenized stocks before the notice period expires. This period applies to the public notice before operations begin, while auditability and public deployment are requirements for the smart contracts themselves.
The SEC imposes additional conditions to protect tokenized stockholders' rights and link trading to the underlying stock. SEC Chair Paul Atkins said a traded token must give its holder the same rights and privileges as the equivalent class of traditional security. The rights cited include receiving dividends and exercising voting rights, linking the digital representation to the ownership rights attached to the stock. If a third party unaffiliated with the issuer creates a token for a stock, the platform must notify the issuer in writing and give it an opportunity to object before making the token available for trading. If the issuer objects within the specified period, the platform may not make that tokenized stock available for trading.
The order places limits on the number of tokenized shares that may be traded and on trading volumes, and requires the platform to halt trading in a token whenever trading in the underlying stock is halted on its primary listing exchange. Atkins said a platform must be a U.S. person and comply with the economic and trade sanctions programs administered by the Office of Foreign Assets Control. The anti-fraud and anti-manipulation provisions of federal securities laws remain fully applicable to activities in these markets. The order also excludes synthetic securities issued by a third party to provide exposure to the value of an underlying stock, such as linked securities or securities swaps. These conditions define the scope of the trial, from platform eligibility to the nature of the traded asset and how a halt in the underlying stock is handled.
The SEC says the use of distributed ledgers could allow investors to hold their own assets, trade around the clock, own fractions of shares and settle transactions nearly instantly. The SEC sees these uses as potentially improving efficiency and transparency in trading and settlement. But the exemption does not cover decentralized finance, Commissioner Hester Peirce said, adding that the order addresses a specific model for on-chain securities trading. Peirce said investors do not need an exemption to use permissionless smart contracts to trade assets directly with one another. She said the SEC is open to other models, while keeping the current decision within the defined framework covered by the order.
Atkins said the SEC is inviting the public to comment on aspects of the exemption so it can consider those comments when examining further regulatory changes. Commissioner Peirce said temporary, limited exemptions allow the SEC and market participants to monitor the use and trading of tokenized stocks, observe how on-chain and traditional markets interact, and use the experience to help shape permanent rules. Atkins linked the timing of the decision to stalled progress on the Digital Asset Market Clarity Act in Congress during the same week, saying the SEC is acting within its statutory authority to facilitate on-chain trading in certain tokenized stocks. The Senate failed on September 15 to pass a procedural motion to advance the bill, by a vote of 49 to 50. The SEC's comments file page shows public comments received on October 21, 22 and 23, alongside memoranda of meetings with its officials on October 20; the SEC also says its FAQs express the views of staff and do not create new legal obligations.