SEC greenlights tokenized stocks, CFTC expands relief
On Thursday, September 17, 2026, the SEC announced an Innovation Exemption allowing limited trading of tokenized stocks on permissioned AMMs and liquidity pools. S. Securities and Exchange Commission (SEC) announced a temporary “Innovation Exemption” that will allow limited trading of tokenized stocks on permissioned automated market makers (AMMs) and liquidity pools.
Simultaneously, the Commodity Futures Trading Commission (CFTC) expanded its “no-action” relief, exempting certain passive software providers from introducing-broker registration requirements across the industry. These dual regulatory actions arrive swiftly after the Senate blocked the CLARITY Act earlier in the week, prompting both agency chairmen to pursue crypto rules using existing authority.
Navigating New Frontiers for Tokenized Stocks
The coordinated announcements signal a pivotal shift in the American approach to digital asset regulation, moving towards integrating blockchain technology into traditional financial markets. Uniswap’s UNI token responded immediately to the news, surging 19.8% over 24 hours as the market digested the potential implications of these changes.
The SEC’s “Innovation Exemption” marks a critical step towards bringing American capital markets into the digital age. This conditional relief, granted by the SEC’s Division of Trading and Markets, paves the way for onchain trading of tokenized stocks, aiming to modernize core market infrastructure and enhance transparency.
The exemption specifically targets “Tokenized Securities Venues” (TSVs), relieving them from the traditional definition of an “exchange” under the Securities Exchange Act of 1934. It also offers conditional relief from dealer registration for certain liquidity providers. This temporary measure is designed to facilitate onchain trading and collect valuable public data to inform future, more durable policymaking.
Parameters for Tokenized Stock Trading
Under the new SEC order, trading of tokenized stocks is subject to strict limitations and operational requirements. Venues may list up to 75 Tier 1 symbols, which include S&P 500 and Russell 1000 stocks, along with specific exchange-traded products. Trading volume for these Tier 1 symbols is capped at 0.25% of the prior month’s average daily share volume.
For Tier 2 NMS stocks, venues can list up to 250 symbols, with a higher trading cap of 2.5% of average daily volume. Breaching these volume caps will trigger a three-month pause in trading for that specific security. These measures reflect a cautious approach, allowing the SEC to observe market behavior before permanent rules are established.
Furthermore, TSVs must operate with publicly auditable smart contracts on public ledgers. They are required to halt trading in a tokenized stock whenever the primary listing exchange halts its underlying asset. Venues must also publish 30 days of dollar-denominated transaction data, updated every 10 minutes, covering symbol, price, size, time, and direction. A robust framework for data transparency is key to the exemption.
Issuer Veto and Investor Protections
The SEC’s order includes a significant provision granting issuers a veto over the listing of their tokenized stocks by third parties. Before a venue can list a stock tokenized by an unaffiliated third party, it must provide written notice to the issuer. The issuer then has 30 calendar days to object, and a written objection will bar the listing.
This mechanism ensures that companies retain control over how their securities are represented in the digital realm. Crucially, tokenized shares must carry identical dividend and voting rights, as well as claims on residual assets, mirroring their underlying stock. Third-party tokenizers are also responsible for distributing proxy materials without cost to the issuer or shareholders.
CFTC Expands Software Provider Relief
In a parallel development, the Commodity Futures Trading Commission’s Market Participants Division issued a no-action position, extending relief to passive software providers across the industry. This move signals a more accommodating stance from the CFTC regarding the regulatory burden on technology companies facilitating access to commodity markets.
Previously, similar relief was granted to Phantom Technologies in March through Staff Letter 26-09. Now, through Staff Letter 26-25, the CFTC has broadened this path, stating that passive software providers and their personnel will not face enforcement action for failing to register as introducing brokers or associated persons, respectively.
Defining Passive Software Providers
The CFTC’s letter meticulously defines what constitutes a passive software provider eligible for this relief. Such firms develop and distribute front-end interface software that allows users to submit orders directly to registered futures commission merchants, introducing brokers, and designated contract markets. The key stipulation is that the provider must not participate in individual transactions.
Ten conditions apply to qualify for this relief. These include full disclosure of the provider’s relationships with brokers, any potential conflicts of interest, and comprehensive risk disclosure statements.
Providers must also maintain compliance policies consistent with those of a registered introducing broker, and agree to joint liability with the broker, as well as consent to Commission investigations. This structured approach aims to foster innovation while maintaining market integrity.
Industry Praises Regulatory Progress
The announcements from both the SEC and CFTC have largely been met with enthusiasm from the crypto industry. Many see these actions as long-awaited recognition of digital assets’ potential within established financial systems. These regulatory clarifications are viewed as crucial for the continued growth of digital finance infrastructure.
Summer Mersinger, CEO of the Blockchain Association, welcomed the SEC’s “Innovation Exemption.” She described it as a critical step toward modernizing U.S. capital markets and creating a pathway for responsible financial innovation onchain. Mersinger emphasized that the Commission is acknowledging the need for fit-for-purpose regulatory treatment for new technologies and market structures.
Ji Hun Kim, CEO of the Crypto Council for Innovation, echoed this sentiment. Kim stated that the order effectively keeps this activity within the U.S. regulatory perimeter. He highlighted its alignment with the Commission’s historical approach of providing targeted exemptive relief to accommodate innovative technology while comprehensive rules are developed, drawing parallels to the development of alternative trading system (ATS) and exchange-traded fund (ETF) markets.
Robert Leshner, CEO of Superstate and founder of Compound, also weighed in, predicting that the order “will open the door to the first onshore, compliant, 24/7 tokenized stock trading.” Superstate, an SEC-registered transfer agent, played a role in shaping the Permissioned Pools standard on Uniswap v4.
Leshner anticipates that issuers will begin to rethink products to conform with these new rules in the coming weeks and months.
Challenges and Concerns from Traditional Finance
While the crypto industry celebrated these developments, traditional financial institutions expressed some reservations. The Securities Industry and Financial Markets Association (SIFMA) had previously voiced concerns against broad relief in a November 2025 letter to the SEC, signed by president and CEO Kenneth Bentsen.
SIFMA argued that broad or categorical exemptions risk creating “parallel, but unequal trading ecosystems.” The group maintained that entities performing functions similar to traditional securities intermediaries should face equivalent oversight. However, SIFMA indicated it could support an innovation exemption that included investor caps, transaction limits, duration restrictions, and a notice-and-comment procedure, many of which are present in the SEC’s current order.
The regulatory dance between fostering innovation and safeguarding established markets remains complex. This tension underscores the ongoing debate about how best to integrate nascent blockchain technologies without compromising investor protection or market stability. Regulators are clearly attempting to strike a delicate balance.
The Political Backdrop and Regulatory Philosophy
These actions did not emerge from a vacuum; they followed the Senate’s rejection of the CLARITY Act, a market structure bill that sought to clarify crypto regulations. The Senate failed to reach cloture on the motion to proceed to H.R. 3633, falling 11 votes short of the 60 required in a 49-50 vote. This legislative deadlock pushed regulators to act within their existing statutory authority.
SEC Chairman Paul Atkins acknowledged the legislative difficulties, stating that “Congress was unsuccessful in advancing the CLARITY Act despite the tireless efforts of many.” He positioned the Commission’s “Innovation Exemption” as a significant step forward, aiming to bridge towards durable rulemaking. Atkins emphasized that this interim measure must be followed by robust, long-term rules to ensure onchain markets remain a viable pathway for capital formation.
Commissioner Hester Peirce offered a distinct perspective, clarifying that the order “is not about decentralized finance.” Peirce noted that truly decentralized systems, driven by automated software, do not raise the same fundamental concerns underlying securities regulation.
She also suggested that investors don’t need an exemption to utilize permissionless smart contracts for peer-to-peer trading, indicating the Commission’s openness to diverse models beyond the specific scope of this order.
Meanwhile, Commissioner Mark Uyeda remarked that the relief would allow the agency to observe venues before crafting long-term rules, advocating against “impulsively attempt[ing] to limit emerging technologies by contorting them into legacy legal frameworks.” This approach reflects a pragmatic stance toward technological advancement.
Looking Ahead: Public Comment and Future Rulemaking
Both the SEC’s “Innovation Exemption” and the CFTC’s expanded no-action relief are explicitly temporary and conditional. The SEC’s order is set to expire five years after its publication, with the Commission retaining the right to amend or withdraw it sooner. Similarly, the CFTC staff no-action position binds only the division that issued it, implying it could be revised.
The SEC is actively soliciting public comments on potential modifications to the exemption and future steps. The order will be published on SEC.gov and in the Federal Register, which will set the official comment deadline.
This ongoing dialogue underscores the regulators’ intent to gather feedback and refine their approach as the digital asset landscape continues to evolve. The agency’s separate Regulation Crypto Assets proposal, addressing offering exemptions for crypto asset issuers, also remains open for comments until October 20.
These actions underscore a growing realization among U.S. regulators that digital assets and blockchain technology cannot be ignored. While specific legislative clarity remains elusive, the proactive steps taken by both the SEC and CFTC demonstrate a commitment to engaging with the crypto industry.
Their aim is to establish a regulated environment that supports innovation while upholding investor protection and market integrity in this rapidly expanding sector.