SEC proposes five-year innovation exemption for tokenised US stock venues

The Securities and Exchange Commission (SEC) has released its long-anticipated “innovation exemption,” offering qualifying platforms a five-year window to operate markets for tokenised US equities without registering as national securities exchanges. Platforms designated as Tokenised Securities Venues (TSVs) would be permitted to facilitate trading through smart contracts and liquidity pools on public, permissionless blockchains, bypassing the registration requirements designed for incumbent venues such as the NYSE and Nasdaq.

The exemption draws a hard line between tokens that confer genuine ownership rights and synthetic instruments that merely track a stock’s price. Only the former qualifies; products that replicate price exposure without conveying voting rights, dividend entitlements, or other shareholder rights are excluded. Issuers also retain a veto over third parties seeking to tokenise their shares, which limits the scope for permissionless replication of any listed company’s equity.

Several constraints accompany the relief. Trading-volume caps and listing limits apply, access to the TSV itself must be permissioned, and all software must be publicly auditable. Firms providing liquidity to TSV pools can separately seek relief from dealer registration requirements. The exemption does not extend to leverage or lending against tokenised positions held on a TSV, so collateral and margin use cases sit outside this particular framework for now.

For operators, the proposal signals that the SEC is willing to accommodate a different market structure, one where smart-contract liquidity pools substitute for traditional order books, provided the underlying asset remains a fully rights-bearing security and the infrastructure is auditable. The five-year horizon and the issuer-veto provision are the two variables most worth watching as the framework develops.