The U.S. Securities and Exchange Commission (SEC) has granted temporary exemptions allowing blockchain-based trading venues to facilitate the secondary trading of tokenized U.S. stocks through automated market makers and liquidity pools.
The move, announced Thursday, comes two days after the Senate failed to advance the CLARITY Act, the crypto market-structure bill that had sought to establish a broader federal framework for digital assets. The legislation fell short of the 60 votes required to proceed in a 49-50 procedural vote on Tuesday.
The SEC’s order creates a five-year “Innovation Exemption” for so-called Tokenized Securities Venues, or TSVs, allowing them to operate without registering as exchanges under the Securities Exchange Act of 1934, subject to a set of conditions.
“Today, the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age by facilitating onchain trading of certain tokenized stocks through the ‘Innovation Exemption,’” SEC Chairman Paul S. Atkins said in statement.
According to Atkins, this would allow TSVs to trade tokenized NMS stock in a permissioned environment today while the Commission considers the need for additional action to facilitate onchain trading.
“As we take this important first step, we invite public comment on all aspects of the Innovation Exemption to help inform the Commission as it considers further changes,” he added.
Under the exemption, TSVs can bring buyers and sellers together through permissioned automated market maker liquidity pools. Participants can use those pools to agree to trades in tokenized National Market System, or NMS, stocks.
The SEC is also temporarily exempting certain liquidity providers from the Exchange Act’s definition of a dealer. The relief covers liquidity providers that supply tokenized NMS stock to a TSV’s AMM pools using their own capital and may engage in activities associated with dealing, including quoting prices to customers or committing capital.
The exemptions are subject to restrictions intended to limit the scope of the experiment and preserve investor protections.
Among other requirements, TSVs must operate within limits on the number of stock symbols and trading volumes. They must verify that tokenized stocks provide holders with the same rights and privileges as the equivalent traditional shares.
Where a third party has tokenized a stock without being affiliated with its issuer, the TSV must notify the issuer and give it an opportunity to object before allowing the tokenized stock to trade.
The SEC also requires smart contracts used by TSVs to be auditable and publicly available, while requiring them to be deployed on public, permissionless distributed ledgers.
Trading in a tokenized stock must stop at the same time as trading in the underlying stock is halted on its primary listing exchange. TSVs must also publicly disclose information about their operations, trading activity and the activity of affiliated entities on the venue.
“Today’s approval of exemptive relief for on-chain secondary trading on a TSV – known as the ‘Innovation Exemption’ – marks an important milestone for the Commission’s work to open our capital markets for tokenized securities,” said Jamie Selway, director of the SEC’s Division of Trading and Markets.
A regulatory route without new legislation
The SEC’s action provides a concrete regulatory route for tokenized equity trading while Congress remains divided over broader digital-asset legislation.
The failed CLARITY Act vote has left the SEC and Commodity Futures Trading Commission (CFTC) with their existing statutory authorities while lawmakers’ efforts to establish a comprehensive market-structure framework remain unresolved.
The Innovation Exemption does not establish a permanent legal framework for tokenized securities. The exemption is temporary, and the SEC is explicitly using the five-year period to gather information and consider whether broader rulemaking is warranted.
The Commission has already been moving toward a regulatory framework for tokenized securities. In January, SEC staff said tokenized securities can take different forms, including securities tokenized by their issuers and instruments created by unaffiliated third parties. The agency distinguished between tokens that represent ownership or entitlement to an underlying security and structures that provide synthetic exposure.
Traditional exchanges have also been working toward tokenized securities trading. The SEC approved Nasdaq’s proposal to allow securities to be traded in tokenized form in March, while NYSE, NYSE American, NYSE National and other venues have submitted similar rule changes or proposals during 2026.
The new exemption is different in that it specifically addresses blockchain-based venues using AMM liquidity pools rather than simply adding tokenized securities to the infrastructure of an existing national securities exchange.
The approach follows months of debate inside the SEC’s Crypto Task Force over whether automated market makers can operate within the existing securities framework. A submission from Galaxy Digital in April argued that qualifying AMMs could be accommodated through a conditional innovation exemption with measures such as whitelisting, volume caps and disclosure requirements.