SEC Opens Door To Blockchain-Based Stocks. Investors Could Soon Trade Equities At All Times.

The Securities and Exchange Commission is opening the door to a new era of digital investing, creating a regulatory pathway that could allow certain trading platforms to offer tokenized versions of publicly traded U.S. stocks and bring traditional markets closer to operating around the clock.

The SEC on Thursday issued an order establishing an "Innovation Exemption," giving eligible trading venues and liquidity providers regulatory relief to facilitate tokenized stock trading, provided they meet specific investor protection and market integrity requirements.

The move allows financial firms to experiment with blockchain-based representations of equities while regulators gather information that could shape future rules. The five-year exemption is part of the SEC's broader "Project Crypto" initiative, which aims to explore how America's financial markets can transition to blockchain-based infrastructure, often described as moving markets "onchain."

"The Innovation Exemption is designed to resolve challenges that have prevented responsible innovation from taking root in the United States while providing investor protections and market integrity standards," SEC Chair Paul Atkins said in a statement. Tokenization refers to creating digital representations of financial assets that can exist on blockchain networks.

One of the biggest potential changes is the possibility of near 24/7 trading. Unlike traditional stock markets, which operate during set hours on weekdays, blockchain-based markets could allow investors to buy and sell tokenized assets continuously, connecting securities with the broader digital asset ecosystem.

Companies including Coinbase, Robinhood Markets, Gemini and Kraken have already introduced offshore tokenized equity products but have not yet offered them to U.S. customers.

The SEC's move comes after lawmakers failed to advance the CLARITY Act in the Senate earlier this week, a major cryptocurrency market structure bill that sought to establish clearer rules for digital assets. Instead of waiting for new legislation, the SEC is using its existing authority to define how tokenized securities can operate.

"The Commission is not cementing today's technology as the standard for tomorrow," Atkins said. "Instead, it is allowing the market to evolve, monitoring its development, and using that insight to inform a nimbler and future-ready regulatory framework."

However, the exemption comes with conditions designed to address concerns about investor protections and corporate control. A central requirement is that holders of tokenized stocks must receive the same rights and privileges as traditional shareholders. That includes economic benefits such as dividends and shareholder rights such as voting privileges.

The SEC also gave companies a role in determining whether their shares can be tokenized. Trading platforms must notify issuers before creating a tokenized version of their stock and wait 30 days after the company receives notice before beginning trading. If the company objects during that period, the tokenized stock cannot be offered through that venue.

The issue became a major point of debate after a public dispute between Robinhood CEO Vlad Tenev and AMC Entertainment CEO Adam Aron over the future of stock tokens. Aron argued that creating digital versions of shares without direct company involvement could weaken the relationship between corporations and their investors.

Robinhood has since said it plans to address those concerns by allowing stock-token holders to redeem tokens for the underlying shares on a one-to-one basis and by adding voting rights.

Despite enthusiasm around tokenization, regulators and market participants have also warned about possible risks. Digital securities could experience greater volatility, particularly during periods of lower trading activity when liquidity is limited.

To reduce those risks, the SEC's Innovation Exemption includes volume limits designed to prevent excessive price swings and protect market stability. The agency emphasized that Thursday's action is not a permanent regulatory framework but rather a testing ground for future policies.

"Critically, this interim measure must be followed by durable rulemaking to ensure that onchain markets remain a viable pathway as our capital markets continue to evolve," Atkins said.