The Securities and Exchange Commission has created a temporary regulatory pathway for certain tokenized U.S. stocks to trade through permissioned, blockchain-based liquidity pools. The “Innovation Exemption” could accelerate experimentation with onchain capital markets while preserving important limits, disclosures, and investor protections.

On September 17, 2026, the SEC issued an order granting temporary, conditional relief to a new category of trading platform known as a Tokenized Securities Venue, or TSV. Qualifying TSVs may facilitate trading in tokenized National Market System stocks through automated market makers and liquidity pools without being treated as “exchanges” under the Securities Exchange Act of 1934.

The order also provides conditional relief from the statutory definition of “dealer” for certain firms that supply tokenized stock and proprietary capital to those liquidity pools. Both exemptions will remain available for five years following publication of the order.

What Is a Tokenized Securities Venue?

A TSV is a platform that brings together buyers and sellers of tokenized NMS stock by:

• Providing one or more automated market maker liquidity pools through which authorized participants can trade; and

• Establishing standards governing who may access and participate in those pools.

Unlike a traditional order-book exchange, an automated market maker uses smart contracts and liquidity pools to establish and execute trades. The exemption is therefore intended to provide a controlled environment in which market participants and regulators can evaluate how onchain equity trading operates in practice.

The relief applies to U.S. persons, including both established financial institutions and new market entrants. However, it does not cover every token that provides economic exposure to a public company.

Tokenized Shares Must Carry the Same Rights

A tokenized stock traded under the exemption must represent actual NMS stock and provide holders with the same rights and privileges as the corresponding traditional shares. Those rights may include:

• Voting rights;

• Dividend rights;

• Ownership and economic rights; and

• Other rights associated with the applicable class of stock.

Synthetic products that merely track the price of a security, such as certain linked securities or security-based swaps, are not treated as tokenized NMS stock for purposes of the exemption.

This distinction is significant. The SEC is creating a pathway for blockchain-based representations of publicly traded shares—not authorizing a broader market for unbacked tokens that imitate the performance of those shares.

Issuers Receive Notice and Objection Rights

The exemption recognizes that a public company may not want an unaffiliated third party creating and trading a tokenized version of its stock.

Before a TSV makes tokenized stock created by an unaffiliated third party available for trading, the venue must provide written notice to the issuer of the underlying shares and give the issuer an opportunity to object. If the issuer objects, the TSV cannot make the tokenized stock available under the exemption.

This protection gives issuers greater control over potential risks involving their names, governance rights, shareholder communications, capitalization records, and market reputation.

Public companies should therefore consider establishing internal procedures for reviewing tokenization notices and determining when an objection may be appropriate.

Conditions Designed to Protect Investors and Markets

The Innovation Exemption is subject to several operational and compliance conditions. Among other requirements:

• Trading is limited by both the number of eligible stock symbols and the volume traded;

• Access to the TSV must be permissioned rather than open to anyone without qualification;

• The TSV must be a U.S. person and comply with applicable sanctions administered by the Office of Foreign Assets Control;

• Smart contracts must be publicly available, auditable, and deployed on a public, permissionless distributed ledger;

• Trading in a tokenized stock must stop whenever trading in the underlying stock is halted on its primary listing exchange;

• The TSV must provide public information concerning its operations and trading activity, including activity involving its affiliates; and

• Tokenized shares must provide the same rights and privileges as the corresponding traditional shares.

The federal securities laws’ antifraud and anti-manipulation provisions continue to apply. As SEC Chairman Paul Atkins emphasized, the exemption does not eliminate the Commission’s investor-protection or market-integrity requirements.

Conditional Relief for Liquidity Providers

The order separately grants temporary relief to certain liquidity providers that contribute tokenized NMS stock to an approved AMM liquidity pool using their own capital.

These firms might otherwise risk being classified as “dealers,” particularly when they routinely provide liquidity, quote prices to customers, or commit capital to facilitate trading. Subject to the order’s conditions, qualifying firms may engage in activities connected with a TSV’s liquidity pools without registering as dealers solely because of those activities.

The relief is narrow. It does not create a general exemption from broker-dealer registration for businesses dealing in tokenized securities or other digital assets.

Why the Exemption Matters

The SEC’s action represents an important shift from addressing tokenization primarily through enforcement and individual interpretive questions toward permitting controlled, real-world experimentation.

For market participants, the exemption may support:

• Onchain settlement of publicly traded stocks;

• Automated liquidity and price formation;

• Greater transaction transparency;

• Investor self-custody;

• Fractional ownership structures;

• Reduced settlement times; and

• New approaches to integrating traditional securities with blockchain infrastructure.

The order may also generate data that helps the SEC determine how existing concepts such as “exchange,” “dealer,” custody, transfer, recordkeeping, and market surveillance should apply to blockchain-based markets.

Commissioner Hester Peirce described the exemption as an interim measure that will allow both regulators and market participants to observe how tokenized stocks operate and how onchain venues interact with traditional markets. She also stressed that the order addresses one particular permissioned trading model and does not purport to regulate genuinely decentralized, peer-to-peer systems.

What Market Participants Should Consider

Businesses interested in relying on the exemption should not treat it as a simple authorization to launch a tokenized-stock platform. Operators will need to evaluate a range of legal and operational questions, including:

• Whether the platform satisfies the definition and conditions applicable to a TSV;

• How participant eligibility and permissioned access will be managed;

• Whether each token provides the legally required shareholder rights;

• How ownership records, voting, dividends, and corporate actions will be administered;

• How issuer notices and objections will be handled;

• Whether liquidity providers satisfy the conditions for dealer relief;

• How trading halts will be synchronized with primary listing exchanges;

• Whether smart contracts have been independently audited;

• How transaction data, affiliate activity, and operational information will be disclosed;

• How securities, sanctions, cybersecurity, privacy, custody, and anti-money-laundering obligations apply; and

• What happens to the platform when the temporary exemption expires.

Public companies should also monitor whether third parties seek to tokenize their shares and develop a framework for responding to the required notices.

The SEC Requests Public Comment

The SEC is requesting public input on potential modifications to the exemption and the longer-term regulation of tokenized securities markets. Feedback received during the five-year period may help determine whether the framework should be expanded, revised, replaced with permanent rules, or allowed to expire.

The exemption should therefore be understood as a regulatory testing ground—not a final framework for tokenized capital markets.

Looking Ahead

The Innovation Exemption provides one of the clearest U.S. regulatory pathways to date for trading tokenized publicly listed stocks onchain. It creates meaningful opportunities for financial institutions, fintech companies, blockchain developers, liquidity providers, and public companies, but those opportunities come with detailed conditions and unresolved questions.

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This blog post is for informational purposes only and is not legal advice. Please consult with a Launch Legal attorney regarding your specific situation.