SEC Favors Physical Stock Tokens Over Synthetic Ones, Who Loses?

AMC's CEO criticized Robinhood's stock tokens as 'evil,' stating that the company provided tokenized shares to over 190 companies without their consent. The SEC approved on-chain stock trading on Thursday while banning synthetic tokens.

The order does not name specific companies but includes two conditions raised publicly by AMC. AMC's CEO, Vlad Tenev, stated that companies cannot control all stock-based products after listing and explained the token as a debt security tied 1:1 to held shares, with buyers receiving only price appreciation and no voting rights.

The SEC clarified that exchanges must verify if token holders have the same rights as common shareholders before listing tokens created by external firms. They must notify such companies of proposed listings and provide an opportunity for objections. Atkins labeled this section 'synthetic token ban.'

Access is key: smart contracts operate on public blockchains but trade only among approved participants with limits on symbols and volume. On-chain trading halts if listed stock trading stops, and the exception expires in five years.

Exchanges must also disclose price, quantity, time, and daily volume data at set intervals, though they won't be considered official stock exchanges. Robinhood later promised to add voting rights and redemption features to its tokens.

Robinhood's crypto head and global chief operating officer Johann Kerbrat called the exception a significant step for growing liquid tokenized securities markets onshore.