SEC Delays Tokenized-Stocks Exemption Over Third-Party Tokens

The Securities and Exchange Commission has postponed release of a proposed innovation exemption that would have allowed U.S. firms to trade tokenized stocks as officials reviewed feedback and raised concerns about tokens issued by third parties.

SEC staff had been preparing to publish the framework as soon as this week, but agency officials shifted the timeline after recent meetings with stock-exchange officials and other market participants. The delay affects companies preparing to launch tokenized-asset projects under the expected rules.

A central point of contention is a provision that would permit trading of third-party tokens-digital representations of corporate shares created without the issuing company’s knowledge or approval. Former regulators and market experts said such tokens could create operational and governance problems for public companies, including difficulty tracking holders, distributing dividends and counting shareholder votes if multiple tokenized versions of the same share exist across different networks.

The exemption was drafted as a narrow regulatory sandbox for on-chain equities, limiting activity to digital versions of existing shares rather than synthetic instruments. Commissioner Hester Peirce defended the limited scope on X, writing the framework would ‘facilitate trading only of digital representations of the same underlying equity security that an investor could purchase in the secondary market today, not synthetics.’ She added she appreciated public interest but not the ‘hyperbole surrounding it.’

SEC staff are working with exchanges and market participants on technical and legal questions raised by tokenization, including custody, recordkeeping and how corporate actions would apply to tokenized holdings. Firms and market infrastructure providers had been expecting the exemption to provide a clearer regulatory path for tokenized trading.

Tokenized assets are digital records on a blockchain that represent ownership of a security. Proponents say tokenization can speed settlement and expand access to markets. Critics point to risks when tokens are issued independently of a company’s shareholder records, which could complicate established processes for corporate governance and investor protections.

The agency has not announced a new target date for the proposal and said officials will continue reviewing feedback from industry and market overseers before advancing the rule. Companies planning tokenized-stock offerings will need to adjust timelines while regulators address the outstanding policy and operational issues.