Relief from the exchange definition, not from securities law

The SEC's order creates Tokenized Securities Venues, or TSVs. A qualifying venue can bring together buyers and sellers of tokenized NMS stocks through permissioned automated market maker liquidity pools without being treated as an exchange under Section 3(a)(1) of the Securities Exchange Act of 1934.

A TSV meeting the conditions therefore does not have to register as a national securities exchange or operate under the registration exemption normally available to an Alternative Trading System for the covered activity. The SEC argues that AMM-based trading can conflict with market rules designed around conventional quotes, order books and Regulation NMS.

Certain liquidity providers using proprietary capital receive parallel conditional relief from the Exchange Act's dealer definition for covered activity. Federal anti-fraud and anti-manipulation provisions remain applicable.

The token has to represent the real stock

The scope is narrower than many products already marketed internationally as tokenized stocks. The SEC explicitly excludes securities issued by third parties that provide synthetic exposure through a linked security, security-based swap or similar structure.

A qualifying tokenized NMS stock must provide the same rights and privileges as the equivalent class of conventional stock. That includes the same economic interest in the company, dividends, voting rights and residual claim in a liquidation.

An issuer can tokenize its own shares or authorize another party to do it. An unaffiliated third party can also create the tokenized form, but the TSV must send written notice to the underlying company before trading begins.

Trading cannot start for at least 30 calendar days after the issuer receives that notice. If the company objects during the period, the TSV cannot make the third-party-tokenized stock available for trading.

Large-cap trading is capped at 75 symbols and 0.25 percent volume

This is deliberately a constrained experiment. Tier 1 tokenized NMS stocks are limited to 75 symbols per TSV and each tokenized stock can account for no more than 0.25 percent of the underlying stock's average daily share volume during the previous month.

Tier 1 includes S&P 500 and Russell 1000 stocks and eligible exchange-traded products under the classification adopted from the Limit Up-Limit Down framework. Tier 2 allows as many as 250 symbols and raises the per-stock volume ceiling to 2.5 percent of average daily volume.

Repeated breaches of a stock's volume threshold require a three-month trading pause. The SEC says the limits are intended partly to contain the market impact of possible price dislocations between an AMM pool and the conventionally traded stock.

The blockchain is public; access to the venue is not

The architecture borrows directly from DeFi without turning US equities into anonymous decentralized trading. Smart contracts used by a TSV must be auditable and public and must operate on a public, permissionless distributed ledger. Participation in the trading venue remains permissioned.

The TSV controls the standards for who can access its pools. The SEC specifically discusses screening intended to address sanctions and illicit-finance risks, including designs in which only credentialed or allow-listed wallet addresses can trade.

Inside the venue, transactions can use AMM Liquidity Pools whose prices are determined through programmed rules based on the quantities of assets committed to the pool rather than a traditional central limit order book.

Putting a stock onchain does not remove Wall Street's trading halts

A TSV must stop trading a tokenized stock whenever the underlying NMS stock stops trading on its primary listing exchange. That includes market-wide circuit breakers, halts pending material news and regulatory suspensions.

The venue must also publish 30 days of transaction data for free in machine-readable form. New transactions have to be added within ten minutes and include dollar-denominated price, size, transaction time, direction and information identifying the relevant AMM pool and smart contract.

The design therefore does not create a completely detached crypto copy of the National Market System. It introduces a different execution mechanism while keeping several important controls synchronized with the conventional equity market.

Five years of experimentation before durable rules

The exemptions expire five years after publication. The SEC is simultaneously requesting public comments on the framework and possible next steps, with no closing date currently listed for comments on the agency's consultation page.

Chair Paul Atkins describes the order as a bridge toward durable rulemaking rather than a permanent regulatory architecture. Commissioner Hester Peirce likewise notes that the SEC is not yet deciding whether participants using the exemptions should ultimately be classified as exchanges or dealers. Observing the experiment is part of the point.

The order itself does not launch a tokenized exchange, switch on a list of stocks or establish actual trading volume. It creates a conditional regulatory route for operators that meet its requirements. Coinbase has publicly signaled interest in offering tokenized stocks in the US, while the NYSE is separately developing a tokenized equities and ETF platform subject to regulatory approvals.

Tokenization no longer means changing what the investor owns

One of the clearest lines in the SEC framework is between two products that have often shared the same marketing label. A synthetic token tracking a stock's price does not qualify. A tokenized stock under this exemption has to carry the rights of the stock itself.

That produces an intentionally hybrid market: public blockchains and AMM smart contracts coexist with identity controls, voting rights, dividends, issuer objections, volume ceilings and traditional trading halts. The SEC has not replaced Wall Street with a DEX. It has given a tightly bounded piece of DEX-style market infrastructure five years to operate inside the US equity system.