SEC Conditionally Approves On-Chain Trading of Tokenized Stocks for Five Years

The U.S. Securities and Exchange Commission (SEC) has granted a conditional exemption allowing automated market makers (AMMs) and liquidity pools to trade tokenized U.S. National Market System (NMS) stocks. The Commodity Futures Trading Commission (CFTC) also announced a non-enforcement policy regarding registration for passive software providers.

The SEC issued an order on May 17 (local time) temporarily exempting tokenized securities exchanges (TSVs) from the definition of 'exchange' under securities laws. The exemption expires after five years, with conditions including limits on the number of tradable securities and trading volume, ensuring identical rights to traditional shares, and requiring publicly auditable smart contracts.

The CFTC's Market Participants Division stated that same day it would not pursue enforcement against registered futures commission merchants (FCMs), introducing brokers (IBs), or designated contract markets (DCMs) for failing to register passive software providers who support trading between users and these entities, under certain conditions.