On 17 September 2026, the US Securities and Exchange Commission (SEC) granted temporary, conditional relief for certain on-chain venues trading tokenized US-listed stocks. The exemption creates a framework for Tokenized Securities Venues (TSVs), but only under specific conditions, including permissioned access and automated market maker liquidity pools.
This guide explains what the exemption allows, what it requires venues to disclose about security, and what it leaves outside its scope. For the basics, including how a share becomes a token, what holders own, and how Coinbase and Robinhood structure their products, see our guide to how tokenized stocks work.
What the SEC Innovation Exemption changes
On 17 September 2026, the SEC issued Release No. 34-106402, creating temporary conditional exemptions for certain tokenized securities venues and qualifying liquidity providers. The relief is intended to allow specified on-chain trading of tokenized NMS stocks without requiring qualifying venues to register as exchanges under the usual rules.
The exemption lasts for five years and applies only if the venue meets the conditions in the order.
Permissioned AMM trading
A TSV must provide automated market maker (AMM) liquidity pools for permissioned participants. This is materially different from simply putting a token on a public DEX and allowing unrestricted trading.
Public blockchains
The order requires the relevant distributed ledger infrastructure to meet specified requirements, including being public and permissionless and having auditable smart contracts.
"Public" does not mean that everyone can trade. The trading environment remains permissioned through participant-access controls.
Shareholder rights
The tokenized NMS stock traded through the framework must provide holders with the same rights and privileges as the traditional security, including dividend and voting rights.
That creates an important distinction between the SEC framework and some existing offshore tokenized-stock products.
Trading limits
The order caps trading in two tiers, measured against each stock's average daily share volume over the prior month. For S&P 500 and Russell 1000 stocks and eligible exchange-traded products, a TSV can list up to 75 symbols and trade no more than 0.25% of average daily volume per stock. For all other NMS stocks, the limits are 250 symbols and 2.5%.
Issuer objections
Before listing a token created by a third party unaffiliated with the issuer, a TSV must notify the company that issued the underlying stock. If the company objects within 30 days, the TSV cannot make that token available for trading.
Trading halts and reporting
The framework includes requirements around trading halts and transaction reporting. A TSV cannot simply treat an on-chain market as independent from the underlying listed market.
The result is a controlled bridge between traditional securities markets and blockchain infrastructure rather than a general exemption for DeFi stock trading.
It also means that the tokenized stocks currently used as DeFi collateral should not automatically be treated as equivalent to assets that qualify under the SEC framework.
What the SEC requires venues to disclose about security
The SEC framework also puts security practices into the public disclosure requirements for TSVs.
A venue's notice must address areas including smart contract audits and code review, business continuity testing, contract upgrade and administrative capabilities, whether the relevant protocols and applications are provided by the TSV, related parties or third parties, MEV policies, and monitoring for market-abuse patterns such as spoofing, wash trading and front-running.
The important distinction is between disclosure and mandatory controls.
The order requires the venue to describe its practices. It does not turn every security practice mentioned in the disclosure into a universal technical requirement.
Before integrating with a venue, an institution can compare what the venue says its contracts can do with what those contracts actually permit.
In particular, the upgrade, pause and override authorities deserve attention. These are not abstract governance questions if a protocol is going to hold tokenized securities or use them as collateral.
Comparing a venue’s TSV notice with what its contracts actually permit is the core of technical due diligence. Our tokenized stock security checklist lists the questions to put to a venue before you integrate or accept its tokens as collateral. It covers upgrade, pause and override authorities, audit and code review scope, oracle behavior, and wrapper and issuer controls.
