SEC’s Tokenized Stock Plan Could Force Crypto Exchanges to Clarify What Investors Actually Own

Given the significant progress the crypto market has made in terms of regulation, the next major regulatory battle will not center on Bitcoin, stablecoins, or memecoins.

Instead, the focus will be on whether crypto exchanges can list tokenized stocks tracking companies like Tesla, Apple, or Nvidia without those companies’ consent, and whether retail investors purchasing these tokens understand that they do not hold meaningful legal ownership of the underlying shares.

According to Bloomberg Law, on May 18, the Securities and Exchange Commission (SEC) is preparing an “innovation exemption” for tokenized stocks. This move could allow crypto-native platforms to offer digital versions of publicly traded securities under lighter regulatory requirements.

Expected to be released within the next week, this plan is part of the agency’s broader “Project Crypto” initiative. In March 2026, the SEC approved Nasdaq’s rules for tokenized equities, followed by similar approval for the New York Stock Exchange (NYSE) in April. Both exchanges now permit tokenized versions of select equities and exchange-traded funds (ETFs) to trade alongside traditional shares using the Depository Trust Company’s (DTCC) tokenization pilot.

This new exemption expands upon those approvals. While previous approvals kept tokenized trading within existing market structures, the new exemption is designed to permit broader on-chain trading by crypto-native venues and certain decentralized finance (DeFi) protocols during a limited experimental period.

Data from DeFiLlama places the on-chain Real-World Asset (RWA) market at nearly $30 billion. This represents just 0.02% of global equity value, compared to SIFMA’s 2024 global equity market capitalization of $126.7 trillion. The tokenized stock segment remains minuscule, and this exemption could determine whether it grows into a regulated extension of US equities or remains a niche crypto side market.

What are tokenized stocks, and why are they significant now?

The concept of tokenized stocks appears simple, but the underlying mechanics are complex.

A traditional stock represents a legal ownership claim in a company, recorded in a custody system and governed by federal securities laws that have existed for decades. A tokenized stock is a blockchain-based instrument linked to that underlying share, though the nature of this “link” varies significantly depending on the issuer.

Tokenized equities generally fall into two structural categories:

• Full security tokens: The token represents a legal claim on the underlying security held by a regulated custodian.
• Synthetic or derivative tokens: These track the price of a stock or ETF via derivatives but do not confer legal ownership or governance rights.

Kraken’s xStocks platform operates in the first category. xStocks currently lists 100 fully backed, 1:1 tokenized US stocks and ETFs. Since its launch in June 2025, it has surpassed $25 billion in total transaction volume, though all trading currently occurs outside the United States. In contrast, a synthetic tracker provides buyers with price exposure without any underlying equity claim.

The SEC’s January 2026 joint staff statement explicitly distinguished between issuer-sponsored tokenized securities, which carry real equity, and third-party synthetic products that offer price exposure to a stock without granting equity or voting power.

The SEC’s recent move is surprising because it leans toward allowing the trading of tokens that lack the backing or consent of the public companies whose shares they track. These tokens would be tradeable on decentralized crypto platforms without offering the same benefits as conventional stocks, such as voting rights or dividends.

Under the proposal, platforms that fail to provide these benefits would lose the right to list the tokens. However, this condition still allows for products that look and trade like stocks while offering a significantly different legal standing to the holder.

In 2025, Coinbase sought the SEC’s approval to offer tokenized equities. If approved, this would place Coinbase in direct competition with retail brokerages and position it at the forefront of the US stock market.

Robinhood has already launched EU stock tokens and is developing a layer-2 blockchain for RWA tokenization. Dinari obtained its broker-dealer license last June to offer blockchain-based shares to US investors. All three companies have been awaiting the regulatory permission that an innovation exemption could finally provide.

Meanwhile, incumbent institutions are developing their own tokenization versions. The DTCC, which processes and safeguards most of the US securities market, plans to begin limited production trades of tokenized assets in July, ahead of a larger launch in October. The system will allow tokenized versions of stocks and ETFs backed by assets the DTCC already holds.

As reported by CryptoSlate in April, if the SEC adopts systems similar to those used by incumbents like Citadel Securities, tokenized stocks will likely represent a better infrastructure built around familiar gatekeepers. If the exemption favors open-chain distribution, a significant portion of that value will flow toward crypto-native exchanges and DeFi protocols.

Not everyone welcomes these developments. Regulators and private companies have raised concrete and specific complaints. In December, SIFMA warned that a lack of standard requirements, such as interconnectivity and price transparency for tokenized assets, could cause markets to “fragment and become disorderly.”

Brett Redfearn, president of Securitize and a former director of the SEC’s trading and markets division, identified this as a problem of consent.

“If third parties can tokenize Apple or Amazon without the issuer at the table, there’s no theoretical limit on how many wrappers of the same company can exist at once. This could create a whole new level of market fragmentation and could leave investors less certain what their shares are actually worth at any moment.”

Citadel Securities made similar arguments in its December letter, calling for structured rulemaking rather than broad exemptions, which it argued could weaken Know Your Customer (KYC) and Anti-Money Laundering (AML) protections.

What do you actually own?

Despite this pushback, the SEC’s willingness to proceed has a coherent policy rationale.

SEC Chair Paul Atkins, who launched Project Crypto after taking over the agency in April 2025, has consistently argued that the US risks pushing innovation offshore if it fails to create domestic regulatory pathways for tokenized securities. At ETHDenver in February, he stated that “market participants should be able to engage with decentralized applications on public, permissionless blockchains if they desire.” The exemption would not eliminate existing legal obligations under federal securities law but could ease certain registration requirements for participating platforms during the pilot. The SEC also plans to include guardrails, such as exposure limits, disclosure requirements, and other conditions tied to the program’s temporary nature.

Commissioner Hester Peirce, who led the push for the exemption from within the agency, was measured regarding its scope when speaking at ETHDenver in February.

“It would be an important step toward facilitating the integration of tokenized securities into our existing financial system, but it would not change the entire financial system overnight,” Peirce said.

According to people familiar with the agency, some SEC officials do not support the decision to allow the trading of third-party tokenized securities.

There are genuine benefits to a well-designed framework. Tokenized stocks can settle near-instantly, trade around the clock, enable fractional access, and become composable with DeFi lending and collateral systems in ways that conventional shares cannot.

As CryptoSlate covered this week, the RWA market is bifurcating into two lanes: one focused on ownership-first, permissioned rails, and another focused on composability-first designs that combine compliant issuance with secondary-market utility. These two paths lead to very different products for the end user.

The central question the exemption needs to answer—and the one any retail investor should ask before buying—is what holding this token actually provides.

If it represents a real equity claim, then tokenized stocks are an infrastructure upgrade for the stock market. If it is a price-tracking instrument without shareholder rights, then the SEC may be opening the door to a parallel market where the label is familiar, but the legal protections behind it are different.

A token that tracks Nvidia’s stock price at 2 AM on a Saturday is not always the same as owning Nvidia. How clearly this distinction is communicated—by the framework itself, by the platforms building on it, and by the disclosures investors actually read—will determine whether this experiment succeeds or becomes the next financial product people regret buying without reading the fine print.

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