SEC Five-Year Exemption Implemented: Tokenized US Stock Compliance Path and Winner Pattern

According to Woofun AI, the US Securities and Exchange Commission (SEC) officially issued a five-year “Innovation Exemption” (Innovation Exemption), opening the first compliance path for tokenized US stocks to be traded on the federal level, marking a new era of institutionalized regulation in the field from a grey area.

This document, entitled “Temporary Conditional Exemption for Distributed Ledger Trading Places and Liquidity Providers for Tokenized NMS Shares”, was issued pursuant to an exemption from section 36 (a) (1) of the Securities Exchange Act. It takes effect immediately from the date of publication and is valid until September 17, 2031. The core of the exemption is that it redefines the legal status of two key entities: one is a “tokenized securities venue” (TSV), that is, a US entity that operates a licensed AMM liquidity pool on a public chain and trades qualified tokenized US stocks, is no longer recognized as an “exchange”, thereby exempting them from the obligation to register as a national stock exchange or ATS; the other is a “covered firm” (covered firm), that is, a “covered firm” (Covered Firm), which uses its own funds in the TSV pool Liquidity institutions are no longer recognized as “traders” and do not need to register as broker-dealers.

The move is aimed at lowering the compliance threshold in the transaction process, but SEC Chairman Paul Atkins stressed that this is only a temporary measure; more lasting rules will still need to be formulated in the future, and there is a risk that the exemption will be overturned if political trends change.

Although the exemption opened up channels for transactions, the SEC set extremely strict compliance conditions to ensure investor rights and market stability. First, the token must fully reflect shareholders' rights in common shares, including dividend distribution, voting rights, and liquidation of remaining property. Second, the number of stocks listed on the trading floor is strictly limited: Tier 1 stocks (such as S&P 500 and Russell 1000 constituent stocks) are limited to 75, and Tier 2 stocks are capped at 250.

In addition, the share of a single stock's on-chain turnover has also been capped. Tier 1 stocks must not exceed 0.25%, and Tier 2 stocks must not exceed 2.5%. More importantly, the listed company has the right to object for 30 days. If a third party tokenizes its shares without authorization, the issuer has the right to object in writing within 30 days of receiving the notice, thereby preventing the token from going public. Member Hester Peirce pointed out that this is not an overall deregulation of decentralized finance, but rather a precise regulation of specific controlled on-chain transaction models.

An in-depth analysis of the details of the clause reveals that the boundaries of immunity are much narrower than they appear on the surface. The primary difference is that the exemption is only for trading venues and liquidity providers, not the token issuer itself. Tokenizers still need to follow the issuance rules of the “Tokenized Securities Employee Statement” and the “Securities Act” issued by the SEC in January of this year, and all offers and sales must be registered or exempted.

At the same time, the exemption did not resolve the status of transfer agents and clearing agencies, which meant that the license threshold for the “tokenization” process was still high. Only companies that have a full set of licenses, such as transfer agents and brokers, can become qualified suppliers of TSV. In other words, the transaction threshold has been lowered, but the issuance threshold has not been relaxed, and licensed institutions have an absolute advantage in this process.

According to data compiled by Woofun AI, the second key detail relates to the specific enforcement mechanism of the “issuer's right to object”. The mechanism only applies to shares tokenized by unrelated third parties: TSV must notify the issuer in writing at least 30 calendar days prior to listing, and cannot be listed if the issuer objects in writing within the period. According to SEC officials, the objection process is “simple enough to just say a single word of objection” to take effect.

This regulation completely blocks the speculative strategy of “go online first, see you in court if there is a problem”. Previous stock dispute cases involving AMD (AMD.US) have shown that the legal basis clearly supports the issuer. Therefore, only those directly authorized or commissioned by the issuer can bypass this objection process, which will fundamentally change the tokenized stock issuance ecosystem.

The third key detail focuses on the technical architecture and transaction restrictions. The transaction mechanism is strictly limited to an AMM liquidity pool. Although it is permitted to provide non-deterministic transaction intentions such as an inquiry for quotation (RFQ), an independent on-chain central price limit order book (CLOB) is not covered. Smart contracts must be public, auditable, and deployed on an open, unlicensed distributed ledger. “Permission” is only reflected in limiting transaction participants through an on-chain whitelist.

This means that existing exchanges that rely on CLOB, such as Coinbase (COIN.US) and Bullish (BLSH.US), cannot directly apply the exemption, and private chain or affiliate chain schemes are also excluded. Furthermore, trading pairs are strictly restricted; tokenized stocks can only be paired with another tokenized stock, payment stablecoin (such as USDC) issued under the GENIUS Act, or tokenized money market funds, and pure cryptographic trading pairs such as “AAPL/BTC” are prohibited.

At the same time, financing, margin trading, lending, or re-pledging pool assets are strictly prohibited within TSV. This makes the current model where tokenized shares issued by Coinbase (COIN.US) on Base can enter Aave and Morpho as collateral is not compliant under the TSV framework, and the DeFi composability narrative of on-chain stocks is greatly discounted as a result.

Under the compliance framework, the biggest beneficiaries are undoubtedly those licensed tokenizers that already hold a full set of licenses and use the issuer's authorization model. Securitize is a typical example. It owns SEC-registered entities in the fields of transfer agents, brokers, ATS, investment advisors, and fund managers, and is listed on the NYSE through SPAC. In the second quarter of this year, Computershare, the world's largest transfer agency, and Continental Stock Transfer, both chose to cooperate with Securitize to promote tokenized shares authorized by issuers of listed companies.

This model links tokenized shares to the issuer's official shareholder register, satisfies the “same rights” requirement, and is not affected by the objection process. Securitize was also one of the first partners in the Uniswap v4 licensing pool, and its stock price rose sharply after the exemption was issued. Ondo's US business line also has obvious compliance advantages. After acquiring Oasis Pro last year, it obtained brokerage, ATS, and transfer agent licenses, and was authorized by FINRA in July this year to provide tokenized NMS shares to US institutions and retail investors. The underlying shares of its custodial tokenized securities do not leave the US regulated escrow chain, and holders can vote through Broadridge. In September, Ondo became DTCC Fund/Serv's first tokenized platform member.

Although Ondo's 440 tokens far exceed the target amount limit, and many of them have not been authorized, and target selection is required, its compliance foundation is solid.

The scope of beneficiaries also extends to Superstate, Galaxy (GLXY.US), and infrastructure layers. The combination of Superstate and Galaxy (GLXY.US) provides another sample: In September of last year, GLXY went online on Solana in the form of Class A common stock itself registered with the SEC, and the transfer updated the official shareholder register in real time. Superstate also participated in designing Uniswap's license pool standards. At the infrastructure level, payment stablecoins benefit from being clearly listed as eligible trading pairs. USDC is in an advantageous position with GENIUS Act compliance status and Circle (CRCL.US)'s newly launched Arc Chain, but will face competition from tokenized monetary funds and other compliant stablecoins.

Uniswap launched v4 Permissioned Pools in July of this year verifies the whitelist at the protocol level and is the most readily available technical layer for TSV, but Uniswap Labs itself is not TSV, and the US entity is still responsible. On the public chain side, the “open unlicensed ledger” requirement favors Ethereum, its L2 (Base, Arbitrum), and Solana, and these chains will become the main bearer platforms for compliant transactions.

Some companies that meet the standards are under pressure to transform. Among them, Coinbase (COIN.US)'s transformation costs are relatively low. In August of this year, Coinbase (COIN.US) launched the first batch of tokenized stocks such as aAPLc and NVDAC on Base. The issuer is SPV registered at the Abu Dhabi International Financial Center. The underlying shares are managed by SEC registered broker Alpaca. The SPV is held in trust, and the holders enjoy beneficial rights rather than claims. Dividends will be delivered (5% distribution fee deducted), but voting is limited to holders who have completed KYC, and SPV “may” vote for them, which is still far from “equal voting rights”.

The product is issued under Reg S and is not open to Americans, and DEX transactions on Base are also unlicensed. Coinbase (COIN.US) is required to establish a quarantined US TSV entity, deploy a whitelist pool, implement voting transmission, and resolve the US issuance compliance path. Dinari has dual license as a transfer agent and broker, and last year became the first tokenized stock platform to qualify as a US broker. DShares uses an escrow equity structure and dividends are automatically mapped, but the transfer of voting rights has not been officially confirmed, and is not open to US users for the time being. The order book network it operates needs to be connected to or built its own TSV.

Bullish (BLSH.US) follows the issuer's authorization route. In May of this year, it will tokenize BLSH's complete shareholder register, which is managed by the transfer agent Equiniti. Bullish (BLSH.US) is buying Equiniti for $4.2 billion. It is expected to complete the settlement in January 2027 and apply for US brokers and ATS licenses at the same time. The medium- to long-term potential is huge, but it is currently in a transition period.

The biggest impact was on companies using the offshore “tracking certificate” model, whose product structure falls within the “independent securities providing synthetic exposure” exclusion clause of the exemption order. Robinhood (HOOD.US) has launched a new generation of Stock Tokens on the Arbitrum-structured Robinhood Chain. There are already about 200. The issuer is Jersey SPV. The product is tokenized debt securities. Holders only have economic exposure and no legal rights for shareholders, and currently have no voting rights. Its prospectus stipulates that underlying stocks can be loaned, and voting rights are waived during the loan period, which directly conflicts with the “same rights”.

This month, the CEO of AMC (AMC.US) publicly requested the removal of unauthorized AMC tokens, which can be viewed as a preview of the issuer's right to object. Robinhood (HOOD.US) CEO Vlad Tenev said physical redemption and voting functions are “coming soon,” but this is still just a plan. To enter the exemption framework, Robinhood (HOOD.US) needed to change the underlying structure from debt notes to escrow interests, which is basically tantamount to rework. Kraken's xStocks is the largest tokenized stock product, with a cumulative turnover of over 35 billion US dollars, covering more than 700 assets, but the holders have no voting rights and no legal claim to underlying stocks. The issuer is also Jersey SPV, and is not open to US users.

The huge offshore scale is difficult to directly monetize in the US, and Kraken needs to use its US licensed entities to launch a separate escrow equity product line. Ondo's offshore business Ondo Global Markets is also in this category. Its products are structured notes issued by BVI. The holder is a creditor. Although Broadridge provides an expression of “voting preferences,” the issuer is not legally obligated to comply.

The industry landscape is undergoing profound reshaping, forming a three-tier division of labor: licensed tokenizers are responsible for minting and connecting shareholder registers, licensed AMMs are responsible for on-chain matching, and compliant stablecoins are responsible for settlement. Considering the 0.25% transaction share limit, it is difficult for the trading venue itself to contribute large-scale revenue in the short term, and the value is more likely to fall first on transfer agents, escrow, stablecoins, and pool infrastructure. The issuer's right of objection will drive the industry from “third party packaging” to “issuer authorization”. The head of research at RWA.xyz anticipates that in the next 12 months, most products will switch to an issuer authorization model, and compliance and authorization will become the core competitiveness of tokenized US stocks.