The SEC has officially approved a conditional Innovation Exemption framework, allowing Tokenized Securities Venues (TSVs) to trade tokenized US stocks on-chain through automated market maker (AMM) platforms. This marks the US securities regulator’s first step toward paving the way for traditional securities trading on the blockchain.

Four mandatory conditions

The exemptive framework sets out four core requirements for TSVs seeking to participate in the pilot program:

  • First, the TSV must be a US entity and comply with OFAC sanctions.
  • Second, only eligible participants are permitted to trade.
  • Third, only tokenized NMS stocks issued directly by the issuer or created by an independent third party may be traded, with synthetic stocks strictly prohibited.
  • Fourth, issuers have the right to opt out and prevent their securities from trading on a TSV.

Crucially, tokenized shares must retain the same rights as traditional securities, including dividend and voting rights. TSVs will also not be classified as “exchanges” under the Securities Exchange Act of 1934 during the pilot period.

Why this decision is noteworthy

Tokenizing securities is not a new concept, but this marks the first time the SEC has established a formal regulatory framework permitting it to operate. Previously, all efforts to tokenize US equities ran into regulatory ambiguity. This decision fundamentally changes the landscape.

On the same day, the SEC also began laying the groundwork for 24/7 trading and rolled out an innovation exemption framework for tokenized securities platforms. The move signals that the US regulator is shifting from a defensive posture to actively shaping the market.

For the crypto industry, this is a powerful signal: if the pilot succeeds, the multi-trillion-dollar US stock market will have a direct bridge to DeFi. Platforms like Uniswap and AMM protocols on Ethereum could become the trading infrastructure for traditional assets, unlocking an entirely new market.

However, the program remains in a pilot phase with several restrictions. The exemptive framework is time-limited and can be revoked. Trading scale will initially be capped. Even so, the trajectory is clear: the SEC no longer views tokenization as a threat, but as an opportunity that must be properly regulated.