US SEC may allow trading of tokenized stocks

The US Securities and Exchange Commission may unveil an innovation exemption this week that would let platforms trade tokenized stocks.

The proposal could also permit third-party versions created without consent from the listed company.

The draft would allow trading on decentralized finance platforms if the tokens give investors benefits like voting rights or dividends.

Officials are still finalizing the details.

The plan comes as lawmakers continue debating crypto regulations.

Some industry groups and SEC officials oppose the plan, saying it could weaken investor protections.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

A possible “innovation exemption” for decentralized finance (DeFi) platforms stands apart from the SEC’s approval of Nasdaq’s plan for tokenized stock trading 1.
Nasdaq won approval because its setup keeps trading within the current market system. It uses The Depository Trust Company (DTC), the main US securities clearinghouse, to settle tokenized trades 1.
The token versions here match what SEC staff call third-party-sponsored tokenized securities, including “custodial” and “synthetic” models, each with its own risks 2.
Unlike issuer-sponsored tokenized securities, these products usually do not give holders ownership of the underlying security or shareholder rights. In a custodial model, rights rest on the sponsor’s custody and records. In a synthetic model, they rest on the sponsor’s credit and performance 2.

Wall Street firms say a lighter rulebook for tokenized securities would split trading across venues and weaken the National Best Bid and Offer (NBBO), which lists the best available buy and sell prices across US exchanges 4.
If the SEC grants it, more trading could move from traditional middlemen to software protocols. That shift would also raise pressure to treat DeFi trading platforms as unregistered exchanges or broker-dealers under current securities law 5.
The choice reaches beyond the US. The World Federation of Exchanges, a trade group for exchange operators, has also urged the SEC not to create a separate market structure for tokenized assets 6.