The Blockchain Association told the SEC that removing Rules 611 and 610(e) would let tokenized equities trade on public blockchains without regulatory friction. The comment period closed Aug. 17.
The Blockchain Association has formally asked the Securities and Exchange Commission to repeal two market rules adopted in 2005, arguing the requirements block tokenized securities from trading on public blockchains.
The trade group filed its comment letter Aug. 17, the final day of the SEC's public comment period for a June 11 proposal to scrap Rules 611 and 610(e) of Regulation National Market System. The agency is considering removing both rules along with related definitions in Rule 600.
“Rules 611 and 610(e) have failed to achieve their stated purposes and have instead imposed substantial, unnecessary costs on market participants for the past two decades,” the association said.
Rule 611 prevents a trading venue from executing stock orders at an inferior price when a better, protected quote is available elsewhere. Rule 610(e) restricts exchanges from displaying quotations that lock or cross protected quotations. A locked market happens when the best bid and offer are equal; a crossed market when the best bid exceeds the best offer.
The Blockchain Association said those constraints interfere with blockchain-based markets that settle trades on distributed ledgers. Markets have become faster and more automated since the rules were introduced, the group said in posts accompanying the filing. Blockchain-based financial infrastructure now offers another way to issue, transfer and settle securities.
“Today’s markets have evolved dramatically since 2005, and a revolutionary shift is now underway: the representation of traditional assets on public blockchains,” the association said.
Tokenization formed a key part of the group’s case. The filing argued that execution quality should account for more than quoted price when blockchain networks provide faster settlement, transparency and programmability.
“[The] logic underlying the rules’ rescission points to the benefits of enabling tokenized securities markets generally,” the association said. “Specifically, that logic favors weighing multiple factors when evaluating securities transactions, including the benefits of tokenized securities.”
The SEC has been exploring separate ways to bring blockchain-based versions of conventional securities within U.S. market rules. In May, a reported proposal would allow blockchain platforms to offer tokenized shares through an innovation exemption. SEC Commissioner Hester Peirce later said any exemption she envisions would be limited to digital representations of existing public equities that investors can already buy in secondary markets.
Several firms have already tested the model. In July, Ondo Finance put U.S. securities onchain through a structure that kept underlying assets in regulated custody while issuing blockchain-based representations through a registered transfer agent. The initial deployment included BlackRock’s iShares Core S&P 500 ETF and Micron Technology shares on Ethereum. Ondo said the tokens were backed 1:1 while the underlying securities remained within conventional custody infrastructure.
Around the same time, BlackRock-backed Securitize tokenized its common stock on Solana and Avalanche when the company began trading on the New York Stock Exchange. Securitize said the blockchain-based SECZ tokens represented the same common shares rather than creating a separate class of equity. Tokenized equities have reached $1.48 billion in market value, according to Bybit’s listing data.
The SEC’s Regulation NMS proposal was published in the Federal Register on June 17 under file number S7-2026-20. Besides repealing Rules 611 and 610(e), it would remove definitions in Rule 600 that would no longer be needed and amend provisions that currently refer to the two rules.
SEC Chair Paul Atkins said when the proposal was issued that two decades of experience with Rule 611 had given the regulator reason to examine its unintended consequences. The proposal is designed to simplify equity market structure and lower costs while letting competition and technology play a larger role in order execution, according to the agency.
Commissioner Mark Uyeda said removing Rule 611 could raise questions involving best execution, transparency, trading mechanics and investor confidence – areas the SEC asked market participants to address during the comment process. Peirce also supported putting the rules under review, arguing that changes in trading technology had reduced the market-connectivity concerns that led regulators to adopt Rule 611 more than two decades ago.
Alongside its support for repeal, the Blockchain Association asked the SEC to update its approach to best execution, the obligation requiring broker-dealers to seek favorable terms for customer orders. The group argued that execution standards should account for the features available through blockchain infrastructure and asked the regulator to acknowledge that transactions completed through public networks can comply with securities requirements.
“The SEC should recognize employing an onchain execution mechanism as a compliant means of achieving fair and efficient execution,” the filing said.
The agency will now consider the comments. No timeline has been set for a decision.
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