SEC Carves Out Narrow Lane for Tokenized Stocks Trading

The U.S. Securities and Exchange Commission (SEC) has introduced an 'Innovation Exemption' that allows for onchain trading of certain tokenized stocks, but only under specific conditions.

The exemption focuses on a particular structure where tokenized shares must deliver holders the same rights and privileges as the underlying securities. This includes protections tied to voting and dividends, along with corporate actions flowing to holders.

Coinbase's tokenized stocks are seen as close to the SEC's framework due to their non-synthetic design and redemption features, but the company's infrastructure is built around a central limit order book, not permissioned AMM liquidity pools. Ondo, on the other hand, has taken steps that map directly to the rights-and-entitlements theme, launching tokenized U.S. securities in June with shares held in traditional custody.

The exemption's narrow scope and temporary nature have raised questions about whether tokenized stocks can deliver clear advantages over conventional brokerage positions. According to Ondo's head of global regulatory affairs, Peter Curley, investors need outcomes that are faster, cheaper, or more useful than existing rails.