The first batch of TSVs may appear in the fourth quarter of this year.

Written by: jk, Planet Daily

On September 17, the U.S. Securities and Exchange Commission (SEC) released the long-awaited "Innovation Exemption," paving a compliant path for on-chain trading of tokenized U.S. stocks at the federal level for the first time. Following the Robinhood chain craze, this late exemption provides a framework for the compliance of tokenized stocks.

On the day of the announcement, related stocks such as Securitize (SECZ), Ondo, and Uniswap saw immediate increases. However, a closer look at the terms reveals that this exemption is far from a "complete liberalization of tokenized stocks." Who does it benefit? Who is left out? Odaily Planet Daily explores the details.

1. What is the SEC's Innovation Exemption?

This document is officially titled "Temporary Conditional Exemption Order for Distributed Ledger Trading Facilities and Liquidity Providers for Tokenized NMS Stocks." The SEC issued it under its exemption authority detailed in Section 36(a)(1) of the Securities Exchange Act, effective immediately, valid for five years until September 17, 2031, while also soliciting public opinion.

It is essential to clarify that this is an exemption order, not a final rule that has gone through the full "notice-comment" procedure. The SEC may amend it at any time, and future committees could overturn it. SEC Chairman Paul Atkins has emphasized that more enduring rule-making must follow the exemption. If a Democrat administration comes to power and nominates a chairman opposed to cryptocurrencies like Gary Gensler, this exemption could be overturned at any moment.

The core contents of the exemption consist of two main points:

• The first concerns "Tokenized Securities Venues" (TSVs). U.S. entities operating licensed AMM liquidity pools on public chains and trading qualified tokenized U.S. stocks are not regarded as "exchanges" and therefore do not need to register as national securities exchanges or ATS.
• The second concerns liquidity providers (Covered Firms). Institutions providing liquidity for tokenized stocks in TSV's pools using their own funds are not deemed "dealers" and do not need to register as broker-dealers.

In exchange, the SEC has set a series of conditions:

• Tokens must carry the same shareholder rights as common stock, including dividends, voting rights, and liquidation entitlement rights.
• The number of stocks that can be listed in the trading venue has an upper limit: Tier 1 stocks (e.g., S&P 500, Russell 1000 constituents) can be a maximum of 75; Tier 2 stocks can be a maximum of 250.
• The on-chain transaction volume proportion for individual stocks has limits: 0.25% for Tier 1, and 2.5% for Tier 2.
• For third-party unauthorized tokenized stocks, the listed company has a 30-day objection right and may disallow their issuance.

Commissioner Hester Peirce summarized the positioning of this order with one sentence: it is unrelated to DeFi and addresses a specific, controlled on-chain trading model, not an overall loosening of decentralized finance. SEC cryptocurrency working group officials expect the first TSVs may appear in the fourth quarter of this year.

2. Seven Details That Are Easily Overlooked

Most reports focus on keywords such as "five years," "licensed AMM," "shareholder rights," and "issuer objection rights." However, the terms that truly determine who can enter the market are often less conspicuous.

1. The exemption applies to trading venues, not tokens

The exemption is only for TSVs and liquidity providers; the party issuing tokenized stocks does not enjoy any exemption. The tokenization party still needs to comply with the issuance rules set out in the SEC's January release of the "Tokenized Securities Employee Declaration" and the "Securities Act"; all offers and sales must still be registered or obtain exemptions.

The exemption order also does not address the status of transfer agents and clearing organizations. Therefore, this order lowers the threshold for "trading," but not for "tokenization." Companies that have already obtained licenses in this regard naturally become suppliers for all TSVs. In other words, one must first obtain all licenses to engage in tokenized stock activities.

2. "Issuer Objection Rights" only apply to third-party tokens

The 30-day objection procedure only applies to unrelated third-party tokenized stocks: TSV must provide written notice to the issuer at least 30 calendar days before going live, and if the issuer raises a written objection within the period, the token cannot be launched. According to SEC officials quoted by CoinDesk, objections could be as simple as a single word of dissent. Stocks tokenized by the issuer themselves or under the issuer's delegation do not go through this procedure.

In other words, the tactic of "launch first, litigate later if problems arise" does not work here. The prior stock dispute related to AMD is now supported by legal grounds favoring the issuer.

3. Only AMM can be used, only on public permissionless chains

The trading mechanism is limited to AMM liquidity pools. The venue may offer pricing inquiries (RFQ) and other non-deterministic trade intents, but independent on-chain Central Limit Order Books (CLOB) do not appear to be covered under this. Smart contracts must also be open and auditable, deployed on public, permissionless distributed ledgers.

The "permission" is only reflected in the access level of the pools: on-chain whitelists limit who can trade. The underlying chain must be a public chain. This means that existing CLOB exchanges such as Coinbase and Bullish cannot directly apply the exemption; private chain or consortium chain solutions are also excluded.

4. Strict limits on trading pairs; BTC cannot be paired

Tokenized stocks can only be paired with three types of assets: another tokenized stock; payment stablecoins issued under the GENIUS Act and other non-security crypto assets; and tokenized money market funds. TSV cannot list purely crypto trading pairs like "AAPL/BTC." This provision effectively positions compliant stablecoins as "legal settlement currencies" within the exemption framework.

5. Leverage is prohibited; borrowing and re-pledging are forbidden

Financing and margin trading are prohibited within TSV, as well as borrowing or re-pledging assets in the pools. Currently, tokenized stocks issued by Coinbase on Base can enter Aave and Morpho as collateral, but within the TSV framework, such composability is non-compliant. The DeFi narrative for on-chain stocks will therefore lose significant traction.

6. Transaction limits are calculated on a consolidated basis for related parties; exceeding limits leads to a three-month trading halt

The quantity limits and transaction proportion limits are calculated on a consolidated basis for related TSVs and cannot be circumvented by splitting across multiple venues. The denominator for transaction volume proportions is the daily average transaction volume from the SIP report for the previous month. No action is required for the first limit breach; thereafter, each limit breach requires that stock to be halted for three months.

To put it in perspective: a TSV's transaction volume in Tier 1 stocks like Apple can at most account for one-fourth of the entire market.

Additionally, there are several other notable points:

• The venue can only conduct secondary trading and cannot perform primary issuances on TSV.
• Third-party tokenizers must distribute agency materials and issuer communications to holders for free.
• Transaction data must be publicly disclosed for free within 10 minutes.
• Liquidity providers must not hold or custody customer assets.
• TSVs must be U.S. entities and comply with OFAC sanctions.

3. Who Benefits, and Who is Most Affected?

By comparing the existing products of each company with the terms item by item, they can roughly be classified into three categories. A general conclusion is that currently, no existing product can enter the exemption framework as is. The difference lies in how far they are from the standards and how high the transformation costs are.

First category: The biggest beneficiaries are licensed tokenizers and underlying infrastructure

The biggest beneficiaries are companies that already hold transfer agent and broker/ATS licenses and have adopted issuer authorization or custodial rights models.

Securitize is the most typical beneficiary: it has SEC-registered entities as transfer agents, broker-dealers, ATSs, investment advisors, and fund managers, and has been listed on the NYSE through a SPAC. In the second quarter of this year, the world's largest transfer agent Computershare and the third-largest Continental Stock Transfer chose to partner with Securitize to promote the issuance of authorized tokenized stocks by listed companies. Tokenized shares remain linked to the issuer's official shareholder register, meeting the requirement for "same rights" and are not affected by the objection procedure. It is also one of the first partners of Uniswap v4's licensed pools. After the release of the exemption order, SECZ's stock price soared, and several brokerage firms raised their target prices.

SECZ's stock price nearly doubled in a week. Source: Yahoo

Ondo's U.S. business lines are also very compliant. After acquiring Oasis Pro last year, Ondo obtained broker, ATS, and transfer agent licenses, and received FINRA authorization in July to offer tokenized NMS stocks to U.S. institutions and retail investors. The custodial tokenized securities issued on Ethereum ensure that underlying stocks do not leave the regulated custody chain in the U.S., and holders can vote through Broadridge. In September, it also became the first tokenized platform member of DTCC Fund/SERV. Ondo's downside is that its more than 440 tokens far exceed the quantity limit and most lack issuer authorization, requiring careful selection and facing objection risks.

Superstate and Galaxy's combination is another example. In September last year, GLXY launched the stock on Solana in the form of SEC-registered Class A common stock, updating the official shareholder register in real-time. Superstate was also involved in designing Uniswap's licensed pool standards.

Other beneficiaries include the "shovel sellers" in the infrastructure layer:

• Stablecoins: Payment stablecoins are explicitly listed as eligible trading pairs, with USDC benefiting from its compliance position under the GENIUS Act and Circle's new Arc chain. However, it will face competition from tokenized money funds and other compliant stablecoins.
• Uniswap: The v4 Permissioned Pools launched in July of this year verify whitelists at the protocol level, making it the most ready-made technological base for TSVs. However, Uniswap Labs itself is not a TSV and still needs a U.S. entity to be responsible for the pool.
• Public chains: The requirement for "public permissionless ledgers" benefits Ethereum and its L2s (Base, Arbitrum) as well as Solana.

Second category: Partially compliant

This category includes companies whose product structure is mostly aligned, with 1:1 custodial real stocks as the base, but still need to address the transfer of voting rights, the openness for U.S. users, or the venue shapes.

Coinbase launched its first tokenized stocks such as AAPLc and NVDAc on Base in August this year. The issuer is an SPV registered in the Abu Dhabi Global Market, with the underlying stock held by SEC-registered broker Alpaca in custody. The SPV holds it in trust for holders, who have beneficial rights but not creditor claims. Dividends are distributed (subject to a 5% distribution fee), but voting is limited to holders who have completed KYC, and votes may be cast by the SPV "potentially," meaning they are still distant from "same voting rights." The product is issued under Reg S and is not open to U.S. persons; trading on DEX on Base is also permissionless. Coinbase needs to establish a separate U.S. TSV entity, deploy a whitelisted pool, implement the transfer of votes, and address the compliance pathway for U.S. issuance. Among major exchanges, its transformation costs are the lowest.

Dinari holds dual licenses as a transfer agent and broker-dealer, becoming the first tokenized stock platform to obtain U.S. broker qualifications last year. dShares employs a custodial rights structure, with automatic dividend mapping, but the transfer of voting rights has not received official confirmation, and it is still stated that it is not open to U.S. users. It currently operates as an order book network rather than an AMM, requiring integration or building its own TSV.

Bullish is taking a different path. In May this year, it tokenized the complete shareholder register of its BLSH on-chain and managed it through transfer agent Equiniti, which is authorized by the issuer. It is acquiring Equiniti for $4.2 billion, with a completion date expected in January 2027, while also applying for U.S. broker and ATS licenses. Once the acquisition and licensing are completed, Bullish may become the most promising candidate in the medium to long term, but is currently still in a transitional period.

Third category: Most impacted are offshore "tracker certificate" models

The most impacted are structured note products that turn holders into creditors of the issuing SPV. Such products fall precisely under the exemption order's exclusion for "providing synthetic exposure through independent securities."

Robinhood launched a new generation of Stock Tokens on the Arbitrum-based Robinhood Chain, with about 200 available. The issuer is an SPV from Jersey, and the product is categorized as tokenized debt securities, giving holders only economic exposure without legal shareholder rights, and currently without voting rights. Its prospectus states that the underlying stocks may be lent out, waiving voting rights during the lending period, which directly conflicts with the "same rights" requirement. This month, AMC's CEO publicly demanded the removal of unauthorized AMC tokens, and this dispute can be seen as a prelude to the issuer's objection rights. Robinhood CEO Vlad Tenev subsequently stated that physical redemption and voting functionality are "coming soon," but this is still just a plan. To enter the exemption framework, Robinhood needs to change the underlying structure from debt notes to custodial rights, essentially meaning a complete overhaul.

AMC CEO opposes the tokenization of its stock. Source: X

Kraken's xStocks are the largest tokenized stock products. According to Crypto Briefing, cumulative transactions have exceeded $35 billion, covering over 700 assets. However, Kraken's legal documents state that xStocks holders do not have voting rights or legal claims to the underlying stocks. Its issuer is also a Jersey SPV, likewise not open to U.S. users. The massive offshore scale can hardly be directly monetized in the U.S., and Kraken needs to leverage its U.S. licensed entity to start another custodial rights product line.

Ondo's offshore business, Ondo Global Markets, is also included here. Its product is a structured note issued in the BVI, where holders are creditors. Although it connects with Broadridge to provide "voting preferences," the issuer has no legal obligation to comply.

Conclusion

In summary, this exemption order exempts trading venues, not tokens.

The derived landscape is likely to have a three-tier division of labor: licensed tokenizers will be responsible for minting and connecting to the shareholder register, licensed AMMs will be in charge of on-chain matching, and compliant stablecoins will handle settlements. Considering the 0.25% transaction proportion ceiling, trading venues themselves are unlikely to contribute significant revenues in the short term. The value will more likely first accrue to transfer agents, custodians, stablecoins, and pool infrastructure.

The issuer's objection rights will also drive the industry to shift from "third-party packaging" to "issuer authorization." RWA.xyz's research lead expects that most products will move to issuer authorization models within the next 12 months.