SEC Clears Tokenized Stocks To Trade Onchain As CFTC Widens Software Relief

The Securities and Exchange Commission issued a temporary, conditional exemption that creates a new category called a Tokenized Securities Venue (TSV), permitting onchain trading of tokenized National Market System (NMS) stocks through permissioned automated market makers. The order, Release No. 34-106402, narrows the application of the Exchange Acts definitions of “exchange” and certain dealer activities for venues operating under the exemption, while leaving antifraud, sanctions compliance and primary offering registration requirements intact. The relief is time-limited: it expires five years after publication and the Commission retains the power to amend or withdraw it sooner. Under the order, venues face symbol and volume limits. Tier 1 — defined by the Limit Up-Limit Down Plan to include S&P 500 and Russell 1000 stocks and specified exchange-traded products — is limited to 75 symbols with trading capped at 0.25% of the prior month's average daily share volume per security. Tier 2 covers up to 250 remaining NMS symbols with a 2.5% volume cap. If a venue breaches the cap for a security, trading in that tokenized security is paused for three months. Operational and transparency requirements accompany the exemption. Venues must run publicly auditable smart contracts on public ledgers, halt trading in a tokenized stock whenever the primary listing exchange halts the underlying, and publish 30 days of dollar-denominated transaction data in machine-readable form, updated within 10 minutes, including symbol, price, size, time and direction. A venue must notify the SEC via tradingandmarkets@sec.gov within one business day of publishing its notice to operate under the exemption. Participants remain subject to applicable SEC and self-regulatory organization registration obligations. The order covers issuer-tokenized stock and third-party tokenizations but excludes synthetic instruments that provide only linked exposure. For third-party tokenizations, venues must notify the issuer at its principal executive office and cannot begin trading for at least 30 calendar days from the issuers receipt of that notice; a written objection by the issuer within 30 days blocks the listing. Tokenized shares must carry the same dividend and voting rights and claims on residual assets as the underlying stock, and third-party tokenizers must distribute proxy materials at no cost to the issuer or shareholders. The Commodity Futures Trading Commission staff issued a separate, same-day action: a no-action position from the Market Participants Division stating that passive software providers that only supply non-discretionary, passive software need not register as introducing brokers. Both regulator moves came shortly after the Senate failed to advance the CLARITY Act, and follow public statements from the agencies' leaders about developing rules for digital market structure. Market reaction included a 19.8% 24-hour rise in Uniswap's UNI token, which traded at $7.37 on Thursday afternoon per CoinGecko; Uniswap Labs had introduced Permissioned Pools on v4 in July, the permissioned AMM architecture contemplated by the SEC order.