SEC Pauses Tokenized U.S. Stocks Plan After Exchange Concerns

The Securities and Exchange Commission postponed a planned ‘innovation exemption’ that would have allowed blockchain-based representations of U.S. stocks to trade. The draft had been expected for release this year but was delayed after feedback from exchanges and market participants.

The exemption would have allowed crypto firms and decentralized finance platforms to trade tokenized shares of companies such as Apple and Tesla while treating the tokens as securities under federal law.

Exchange officials and market operators warned that parallel crypto trading venues could divert volume from listed exchanges, fragment liquidity and complicate price discovery. Regulators flagged challenges in monitoring multiple trading pools for the same underlying security.

Investor protection was a central concern. Market participants pointed to tokens issued by third parties without a company’s consent that may not carry full voting rights or dividend entitlements, producing instruments that differ from ordinary shares.

Supporters told the SEC tokenized equities could enable around-the-clock trading, faster settlement and easier fractional ownership. SEC Chair Paul Atkins and agency staff consulted hundreds of market participants while developing the draft framework.

The market for tokenized real-world assets has expanded to an estimated $34 billion, up about 1,600% over two years. Tokenized equities account for more than $1 billion in market value. Ethereum is the leading blockchain for these assets, followed by Solana, and some large asset managers have launched funds tied to on-chain securities.

No new release date for a revised proposal has been set. The SEC is reviewing feedback and the framework remains under active review; it could be reintroduced later this year depending on how market structure and investor protection issues are resolved.