SEC Paves Way for Tokenized Stocks With Secondary Trading Exemption

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On Thursday, the Securities and Exchange Commission released the long-awaited “innovation exemption” creating a path for secondary trading of tokenized stocks.

At a high level, the 60-page order grants a five-year conditional exemption from the Exchange Act definition of “exchange” to certain tokenized securities venues (TSVs) that provide permissioned automated market makers (AMMs) and liquidity pools. It also grants a parallel exemption from the definition of “dealer” to certain liquidity providers using their own capital. Retail investors, institutions, and regulated financial firms can all participate, subject to the venue’s permissioning standards.

The exemption applies to National Market System (NMS) stocks (generally U.S. exchange-listed equities and certain exchange-traded products) but excludes options, rights, and warrants. The order does not provide separate relief under the Investment Company Act, meaning that registered funds may still face additional constraints even if their shares qualify as NMS stock.

SEC Chairman Paul Atkins said the exemptions would help “bring America’s capital markets into the digital age.” Commissioner Hester Peirce called it “a small step toward waking up to a tokenized tomorrow,” while Commissioner Mark Uyeda described it as “scope relief to experiment responsibly, learn, and translate old protections to new contexts.” The principal conditions include:

• Five-year pilot with extensive notice requirements. The exemptions run from Sept. 17, 2026 through Sept. 17, 2031. A TSV must be a U.S. person, publish a detailed public notice at least 30 days before beginning operations, notify the SEC and continually update its disclosures as its assets, systems, or operations change.

• Permissioned trading on permissionless infrastructure. The venue’s smart contracts must be public, auditable, and deployed on a public, permissionless blockchain. Access to secondary trading of tokenized securities, however, must be limited to verified or credentialed participants. That permissioning can be enforced at the AMM-pool level or through transfer restrictions encoded into the token.

• Actual shares with full shareholder rights. A qualifying token must convey the same interest in the company, dividends, voting rights, liquidation rights, proxy materials, and other issuer communications as the traditionally formatted stock. The exemption is for secondary trading only; primary issuance cannot occur on a TSV. Synthetic exposure, security-based swaps, linked securities, and third-party securities representing an interest in an SPV or other wrapper do not qualify.

• Issuer-sponsored tokens are expressly permitted; third-party tokenization is allowed within a narrower lane. Before listing a stock tokenized by an unaffiliated third party, a TSV must notify the underlying issuer and wait at least 30 days. If the issuer objects during that window, the TSV cannot list the token for trading.

• Transparency and market-integrity protections. A TSV must publish U.S. dollar-denominated transaction data within 10 minutes and keep at least 30 days of data freely available in machine-readable form. It must halt trading whenever the underlying stock is halted on its primary exchange, report significant operational or cybersecurity events, maintain books and records subject to SEC examination, and cannot offer margin, lend assets, extend credit, or permit rehypothecation. The federal securities laws’ anti-fraud and anti-manipulation provisions continue to apply.

Our take

We enabled tokenized $GLXY on the Solana blockchain in September 2025. Shareholders can work with our transfer agent, Superstate, to convert their traditionally formatted shares into a tokenized format. But due to the lack of clarity on the secondary trading of these instruments, onchain secondary trading of tokenized $GLXY has mostly been impossible. This new exemption provides what Galaxy and other issuers need – an exemption for onchain trading venues from the exchange rules, and a clarification that those trading in tokenized stocks are not “dealing” if they trade in their own account. Over the last two years, we have met multiple times with the Securities and Exchange Commission at both the Crypto Task Force and the staff levels to advocate for an exemption that would provide breathing room for innovation that can ultimately inform more durable rulemaking. This innovation exemption creates a pathway to enable secondary trading of onchain $GLXY, and we are examining next steps.

The two threshold questions throughout this process were 1) whether onchain stock trading would need to be “allowlisted” and 2) whether tokenized shares would need to be sponsored by the underlying issuer. We followed the issuer-sponsored approach and our stock token requires KYC onboarding with our onchain transfer agent, Superstate. On the first question, the SEC came down cleanly in favor of permissioning but notably required public blockchains. The result is a sensible hybrid: public auditable infrastructure with access controls at the pool or asset level.

On the second question, the SEC did not categorically require issuer sponsorship, but the third-party pathway is considerably tighter than the phrase “third-party tokenization” may imply or the third-party wrappers we see today in the market from Robinhood, Ondo, and xStocks. The token must represent the actual NMS stock and provide all its legal, economic, and governance rights. A separate note, swap, SPV interest, or other security merely linked to the stock is outside the exemption. And the third-party issuer must still allow the underlying NMS stock issuer to opt out within 30 days.

That 30-day opt-out is a middle ground between the issuer-only and no-consent camps, but it will still be controversial. The issue was illustrated by the recent public spat between Robinhood CEO Vlad Tenev and AMC CEO Adam Aron. Aron objected to Robinhood offering an AMC-linked token on Robinhood Chain without the movie-theatre chain’s involvement. Tenev argued that issuers should control the rights attached to their shares, but not every separate financial product that references freely transferable stock. Robinhood’s Stock Tokens would not qualify for this exemption regardless, because Robinhood itself describes them as “tokenized debt securities” that provide economic exposure but no legal or beneficial rights in the underlying issuer. For third-party products that do convey full shareholder rights, however, the SEC gives the issuer a time-bounded veto. Those favoring open secondary markets will view any veto as too much, while issuer-sponsored advocates may view a one-time 30-day window as too little.

The SEC deserves credit for its thoughtful and forward-leaning leadership. Rather than shoehorn a new market structure into rules built for different technology, or wait for every question to be answered and dictate from the top down to the market, the Commission has created a bounded pathway to launch, observe, and improve. Some of the conditions will undoubtedly need refinement, but this is serious policymaking and a major step toward functional onchain capital markets.