Once this plan is implemented, the same stock may have dozens of third-party tokens existing simultaneously, severely splitting market liquidity.

Written by: Li Jia

Source: Wall Street Insights

The U.S. Securities and Exchange Commission (SEC) has postponed a regulatory exemption plan for "tokenized stocks" at the last minute, reigniting the competition between the crypto industry and traditional financial markets.

According to Bloomberg, the SEC originally planned to formally release the so-called "innovation exemption" framework as early as this week, allowing a "third-party" token to be traded continuously on decentralized crypto platforms. This type of token is essentially a synthetic tool that tracks stock prices and can circulate without authorization from the listed company, but it may not necessarily carry the voting rights or dividend rights of common stock. The plan aims to enable investors to trade U.S. stocks through digital tokens.

However, after intense lobbying from industry organizations behind traditional exchanges such as Nasdaq, Cboe, and CME Group, the SEC decided to delay the publication schedule to further assess feedback from various parties. Notably, there are also internal disagreements within the SEC on this matter.

The impact of this pause on the market should not be underestimated. Parties that had bet on a regulatory bonus for the crypto market—ranging from crypto exchanges to traditional financial institutions—will now see their strategic moves slow down. There remains significant uncertainty regarding the direction of the final proposal.

Third-Party Tokenized Securities: Core Controversies and Regulatory Boundaries

The core controversy of this "innovation exemption" lies in how to handle "third-party tokenized securities."

The SEC categorizes tokenized securities into two types: one led by the issuer, and the other led by third parties not directly affiliated with the issuer. The focus of this exemption policy is the latter—any third party can issue digital tokens tracking the stock price of companies (such as Apple, Nvidia, Tesla) without the consent of the listed companies and freely circulate them on decentralized finance (DeFi) platforms.

These tokens are essentially synthetic tools that track stock prices and do not necessarily come with traditional shareholder rights such as voting rights or dividend rights. Reports indicate that the SEC is considering requiring trading platforms to provide these rights, or face the risk of delisting.

From a policy background perspective, this framework is part of the "Project Crypto" initiative led by SEC Chair Paul Atkins, aimed at aligning with the pro-crypto regulatory stance of the Trump administration and ending the previous so-called "enforcement-based regulation." The core driving force behind this exemption is Commissioner Hester Peirce—Atkins’ long-time ally. However, both have recently been working to lower market expectations, characterizing any potential exemption as a "limited and gradual" measure.

Traditional Exchanges Apply Intense Pressure, Delaying Publication Schedule

The direct trigger for the SEC's halt came from intensive lobbying by traditional financial institutions.

According to Bloomberg, SEC staff recently held multiple meetings with exchange officials and other market participants, and after synthesizing feedback from various parties, decided to postpone the release of the exemption framework. The World Federation of Exchanges—whose members include Nasdaq, Cboe, and CME Group—had previously sent a stern warning letter to the SEC in November 2025.

This organization believes such exemptions could "dilute" existing investor protection mechanisms and "distort" the competitive landscape by providing traditional markets with regulatory shortcuts that crypto exchanges do not have. The Federation explicitly stated that granting legitimacy to tokenized stocks before full compliance is established would "undoubtedly have negative, if not severe, consequences for the U.S. market."

It is worth noting that the traditional financial camp does not completely negate tokenized securities. Nasdaq has obtained SEC approval in March 2026 to advance its own tokenized securities plan, but its model is vastly different from the "innovation exemption": Nasdaq’s plan requires all trades to be completed within the exchange, retaining full shareholder rights and built on DTCC’s enterprise-level blockchain.

Concerns About Market Fragmentation: Warnings from Within the SEC and the Industry

Opposition is not just coming from traditional exchanges; serious warnings are also emerging from within the SEC and heavyweight industry organizations.

Brett Redfearn, President of tokenized company Securitize and former Director of the SEC’s Trading and Markets Division, pointed out that if a third party can tokenize companies like Apple or Amazon without the issuer's involvement, theoretically, the same company can be tokenized into countless different versions. "This could create an entirely new level of market fragmentation, making it difficult for investors to determine how much their stocks are really worth at any given moment."

The Securities Industry and Financial Markets Association (SIFMA) warned last December that the tokenized market might lack basic requirements for market interconnectivity and price transparency, posing a risk of "fragmentation and disorder." Citadel also stated in its comments submitted that any exemptions should not override core market safeguards such as Know Your Customer (KYC), Anti-Money Laundering (AML) measures, and others.

The "innovation exemption" plan proposes to establish an entirely new crypto-native market outside of the existing system, allowing dozens of third-party token issuers to simultaneously track the same stock, which potentially fragments market liquidity—this is precisely the systemic risk pointed out in these warnings.

Capital and Legislation Move Forward Together, Uncertainty Remains Around Exemption Prospects

Despite the delay of the exemption framework, the market layout surrounding tokenized stocks has not ceased.

Crypto exchange Bullish, led by former New York Stock Exchange President Tom Farley, this month acquired transfer agent Equiniti for $4.2 billion. The latter is responsible for tracking stock ownership records and assisting in the distribution of dividends, an important part of the stock market infrastructure. Additionally, the New York Stock Exchange is also building a new platform for tradable tokenized stocks and ETFs using blockchain technology.

At the legislative level, the U.S. Senate Banking Committee last week advanced a digital asset market structure bill—the Clarity Act. This bill aims to establish the Commodity Futures Trading Commission (CFTC) as the main regulatory body for most areas of the crypto industry, while retaining the SEC's regulatory authority over digital securities.

SEC spokespersons stated that the agency has held meetings with hundreds of market participants and widely solicited opinions, indicating that the final proposal may still be adjusted before publication. This means that the final form of the "innovation exemption"—and even its ability to be implemented—remains quite uncertain.