SEC Issues “Innovation Exemption” to Facilitate the Trading of Tokenized NMS Stock and Request for Comment

The Securities and Exchange Commission on Sept. 17, 2026 granted temporary, conditional relief to Tokenized Securities Venues (TSVs), exempting them from the Exchange Act definition of “exchange” to permit trading of tokenized National Market System (NMS) stock through permissioned automated market makers and liquidity pools. The action, called the “Innovation Exemption,” is intended to enable on‑chain secondary trading of certain tokenized stocks in a permissioned environment while the Commission assesses whether additional regulatory steps are needed. The exemptive order attaches several conditions intended to protect investors and preserve market integrity. Among the requirements, TSVs must limit the number of symbols and the trading volume of tokenized NMS stock offered on their platforms; verify that tokenized shares confer the same rights and privileges as the equivalent traditional NMS stock; notify issuers and give them an opportunity to object before listing tokenized stock tokenized by unaffiliated third parties; use public, auditable smart contracts deployed on a public, permissionless distributed ledger; halt trading in a tokenized NMS stock concurrent with any trading stoppage in the underlying NMS stock on its primary listing exchange; and provide public notice of TSV operations and trading activity, including affiliate activity. The order also conditionally exempts, for a temporary period, certain liquidity providers in AMM Liquidity Pools from the Exchange Act definition of “dealer.” That relief applies to liquidity providers who supply tokenized NMS stock as proprietary capital and who may otherwise engage in activities that are indicia of dealing, such as quoting prices to customers or agreeing to provide committed capital. The exemptions will expire five years after their publication. The SEC invited public comment on all aspects of the Innovation Exemption and on possible modifications or next steps; the order will be published on SEC.gov and in the Federal Register. SEC Chair Paul S. Atkins described the step as a move to facilitate on‑chain trading of certain tokenized stocks within the Commission’s statutory authority, and Jamie Selway, Director of the Division of Trading and Markets, said the division will work with interested parties and field questions from investors and market participants.