SEC Grants 5-Year Conditional Exemption for Tokenized Stock Trading Platforms

The U.S. Securities and Exchange Commission (SEC) has granted a five-year conditional 'innovation exemption' to allow limited on-chain trading of tokenized securities on designated trading platforms (TSVs), subject to certain conditions. The SEC issued an order on the 17th allowing TSVs to trade approved U.S. stocks in a permitted environment. Under the exemption, TSVs may utilize automated market makers (AMMs) and liquidity pools for authorized participants, with temporary relief from the definition of 'exchange' under securities laws. Liquidity providers are subject to separate conditional exemptions related to dealer regulations. The SEC has imposed limits on the number of tradable securities and transaction volumes, while ensuring tokenized stock holders receive rights and privileges equivalent to traditional shares. Smart contracts must be auditable and public, and if underlying stock trading halts, tokenized stock trading must also cease simultaneously.