SEC Exempts Tokenized Stocks from Exchange Definition, CFTC Widens Software Relief

The Securities and Exchange Commission (SEC) has issued a conditional exemption allowing tokenized National Market System (NMS) stocks to trade on permissioned automated market makers (AMMs). The five-year order grants relief from the definition of 'exchange' for a new category called Tokenized Securities Venue (TSV), enabling onchain trading through permissioned liquidity pools.

The Commodity Futures Trading Commission (CFTC) has also issued a no-action position, telling passive software providers they need not register as introducing brokers. This extends a previous action taken in March for Phantom Technologies, and now covers other firms that develop front-end interface software allowing users to submit orders directly to registered futures commission merchants.

Uniswap's token rose 19.8% over 24 hours after the news, while Bitcoin was up 1.2%. The SEC order is temporary and can be amended or withdrawn before it expires in five years. It excludes instruments where a third party issues a crypto asset representing its own security that provides synthetic exposure to an underlying security.

SEC Chairman Paul Atkins said the Commission 'is taking a significant step forward, within its statutory authority, to bring America's capital markets into the digital age.' Commissioner Hester Peirce drew a boundary in her statement, saying 'this order is not about decentralized finance' and that investors can use permissionless smart contracts for peer-to-peer trading without an exemption.