The SEC's innovation exemption would open 24/7 trading for tokenized U.S. stocks on qualified platforms. Custody and clearing rules remain unresolved.
The U.S. Securities and Exchange Commission is drafting an innovation exemption that would create a regulatory path for tokenized U.S. stocks to trade around the clock.
SEC Chair Paul Atkins has backed the exemption as part of a wider effort to move parts of U.S. financial markets on-chain. The proposal could let qualified platforms trade digital versions of U.S. stocks on blockchain networks under tailored SEC requirements. The framework keeps continuous trading and blockchain settlement within federal securities rules.
None of this is in effect yet. The SEC recently canceled a meeting that was expected to address parts of its wider crypto regulatory program, citing a scheduling issue. Existing securities requirements are unchanged.
A framework for tokenized stocks would remove one of the main restrictions of traditional U.S. equity markets: fixed trading hours. Because blockchain networks process transactions continuously, they can carry trades at any hour, including weekends. The SEC describes the structure as supporting faster settlement than conventional stock market systems.
The SEC still needs to address custody, investor protection, market surveillance and the interaction between tokenized shares and existing clearing systems. The agency has not detailed how it plans to handle any of them.
U.S. market infrastructure has already started moving. The SEC previously granted no-action relief to the Depository Trust & Clearing Corp. for a tokenization pilot covering selected U.S. equities and Treasury securities. Nasdaq has pursued its own infrastructure for trading tokenized securities. Bybit added tokenized Meta and Tesla xStocks, and total value in the tokenized-equities category reached $1.48 billion.
The regulatory push coincides with infrastructure work at traditional exchanges and clearing firms. Market participants are examining how tokenization runs alongside existing brokerage and custody systems.
Tokenized stocks would remain securities regardless of whether ownership records sit on a blockchain. SEC materials also distinguish between issuer-backed tokenized securities and third-party models, so the structure of each product determines where investor rights sit.
Regulation NMS is the SEC rule set governing how U.S. equity orders interact across trading venues. Ondo Finance, in an Aug. 11 submission, backed proposed changes that would give alternative trading models more room beside traditional continuous order books. The exemption and the NMS changes sit inside the same market-structure review.
Platforms building on-chain equity products carry a timing exposure. The exemption is still under development, so a 24/7 product has no rule set to operate under. A platform that launches before the framework exists gets no exemption; current rules apply to tokenized shares.
Third-party tokenization has an extra layer of exposure. An issuer-backed tokenized share ties investor rights to the company that issued it. For a third-party product, the open question is who holds the underlying asset and how a custody failure gets resolved.
Publishing the exemption with custody and clearing requirements spelled out would close the biggest gaps for platforms. The DTCC pilot is the precedent; the no-action relief ran inside existing market infrastructure, where clearing and settlement were already defined.
The risk worsens if the timetable slips. A meeting expected to address parts of the SEC's crypto program was canceled over scheduling, and the exemption has no release date. Until the exemption is published, tokenized stocks stay inside existing securities rules, and continuous trading has not received blanket approval.
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