AIBRIEF
An SEC exemptive order (Release 34 106402) carves certain blockchain based venues and the firms that provide their trading liquidity out of the law's definitions of stock exchanges and securities dealers for up to five years, and excludes
The Securities and Exchange Commission on Thursday issued a temporary, conditional exemptive order, the "Innovation Exemption," letting certain venues trade tokenized versions of U.S. exchange-listed stocks onchain, while the agency seeks public comment on whether to make the framework permanent (SEC press release).
Exchange Act Release No. 34-106402 carves out Tokenized Securities Venues (TSVs) from the "exchange" definition of the Securities Exchange Act of 1934, and their liquidity providers from the "dealer" definition. Both exemptions expire five years after Federal Register publication, and the SEC is asking whether to extend, modify, or expand them.
The lane is narrow. Only tokenized National Market System (NMS) stocks, meaning U.S. exchange-listed shares carrying the same voting and dividend rights as the underlying, qualify. Synthetic tokens, tokenized security-based swaps, and tokenized linked securities are excluded, and issuers retain the right to object to third-party tokenization (SEC fact sheet).
Covered venues must publish operations on their website at least 30 calendar days before launch, notify the SEC within one business day, mirror trading halts in the underlying primary listing, and run auditable smart contracts on a public permissionless ledger. Order matching runs through permissioned automated market makers, software that prices trades from a pool of approved participants rather than a traditional order book.
SEC Chairman Paul S. Atkins called the order a "bridge toward durable rulemaking" after the Senate failed to advance the CLARITY Act the prior week (Atkins statement). Comments are due after publication in the Federal Register.