The "Innovation Exemption" framework, expected to be released by the US Securities and Exchange Commission (SEC) as early as this week, is a key component of SEC Chair Paul Atkins’ "Project Crypto" initiative. According to sources familiar with the matter, the core breakthrough of this framework is that, for the first time, it allows third parties to create and list digital tokens linked to the stock price of a public company—without the explicit authorization or consent of the underlying company. In other words, shares of listed companies like Tesla, Apple, and NVIDIA could appear as "tokenized TSLA" on blockchain trading platforms, all without notifying the company’s legal department.
The framework clearly divides tokenized securities into two categories. The first involves tokenization conducted by the securities issuer or its representative, which requires the issuer’s direct participation and authorization. The second category covers tokenization by third parties with no direct connection to the issuer—the main focus of this framework. For the latter, the SEC has set several operational requirements: platforms must still provide investors with core shareholder rights (such as dividends or voting rights), or risk losing their listing eligibility. In addition, participants are subject to trading volume limits, whitelisted client access, and periodic disclosure reporting obligations.
It’s important to note that there is not complete consensus within the SEC regarding this framework. Media reports indicate that some SEC officials remain cautious about allowing third-party tokenization. Ultimately, Commissioner Hester Peirce and her long-time ally, Chair Atkins, jointly pushed the decision forward. From a policy standpoint, the framework is closer to a 12- to 36-month regulatory sandbox than a permanent rule change. Its main goal is to test the viability of on-chain securities trading in a controlled environment while upholding fundamental investor protections.
Legal Nature of Tokenized Securities and Regulatory Pathways for Third-Party Issuance
To understand the legal innovation of this framework, it’s essential to clarify the legal foundation of tokenized securities. In July 2025, SEC Commissioner Hester Peirce issued a statement titled "Enchanting, but Not Magical," asserting: "While blockchain technology is powerful, it does not have the ‘magical ability’ to change the legal nature of underlying assets." In other words, tokenization does not alter the classification of securities—tokenized stocks remain securities and are still subject to existing securities laws. The Innovation Exemption is a regulatory experiment built on this legal foundation, not a fundamental amendment to securities law.
At the legal memorandum level, the framework identifies three operational models for tokenized US equities. The first is the direct issuance model, where the issuer itself registers equity on the blockchain—this path requires issuer authorization. The second is the custodial receipt model, in which a third-party custodian freezes existing shares and issues corresponding digital certificates on-chain. Here, the underlying securities remain in their original form in the custodian’s account, so the issuer’s consent is not required. The third is the synthetic model, where derivative contracts track the price movements of the underlying stock, and the tokens operate independently from the actual securities—again, without issuer authorization.
The framework’s regulatory response essentially acknowledges the legality of the latter two models. This means both approaches will have legitimate experimental space under the same regulatory framework: one path involves tokenization in cooperation with issuers, as seen with Galaxy Digital or Superstate; the other involves "mint-then-trade" operations by platforms like Robinhood or various DEXs. Both models are placed on equal footing from a regulatory perspective.
Strategic Positioning and Compliance Pathways for Core Market Participants
The SEC’s framework has already triggered a wave of strategic moves among market players. On the traditional exchange side, Nasdaq received SEC approval on March 18, 2026, to allow certain securities to be traded and settled in tokenized form within its market center. This applies to Russell 1000 index constituents and ETFs tracking the S&P 500 and Nasdaq 100. The New York Stock Exchange’s parent company, ICE, is also building a 24/7 tokenized securities trading platform, currently pending regulatory approval. Traditional exchanges are employing a parallel track design—where the same stock exists in both traditional and tokenized forms, matched with equal priority in the same order book—aiming to integrate tokenized securities into the existing clearing and settlement system rather than building a new one from scratch.
On the crypto-native side, Coinbase launched commission-free traditional stock trading in March 2026 and has identified tokenized equities as its next strategic focus. Once the framework is in place, it will provide Coinbase with crucial regulatory support for its "Everything Exchange" strategy. Robinhood moved even earlier, rolling out 100 tokenized US stocks and ETFs in the EU by the end of 2025 and is now developing a Layer 2 blockchain dedicated to RWA tokenization. Once the exemption framework is implemented, Robinhood may directly compete with Coinbase in the US retail market for tokenized equities.
There are significant differences in compliance pathways between these two types of participants. Traditional exchanges rely on DTC’s tokenization pilot architecture, emphasizing "seamless integration" with the traditional securities clearing system. Crypto-native platforms, on the other hand, are more inclined to leverage DeFi infrastructure, pursuing 24/7 trading and atomic settlement. The most significant structural change the framework could bring is allowing both pathways to coexist within the same regulatory sandbox.
Potential Impact of Third-Party Tokenization on Public Company Governance
The most controversial aspect of this framework centers on the redistribution of governance power within public companies. Under traditional securities law, whether and how a company’s equity is tokenized should, in theory, require the company’s knowledge and consent. However, the framework’s guidance clearly suggests allowing trading of tokens not authorized by the public company itself.
This means public companies will face a parallel market they cannot fully control. If there are price discrepancies between on-chain tokens and the underlying stock, if on-chain voting rights conflict with traditional proxy systems, or if trading activity in tokenized assets surpasses that of the actual stock—CFOs and legal teams will need to prepare contingency plans for these scenarios.
Some market participants have voiced explicit concerns about the framework’s potential impact. Certain securities industry insiders warn that broad exemptions for tokenized stocks could weaken customer due diligence, anti-money laundering measures, and other investor protections. The CEO of Green Impact Exchange noted that token holders may not receive all shareholder rights (such as voting or dividends)—a risk partially validated by the 2022 FTX bankruptcy, when its tokenized stocks "disappeared."
Legally, public companies can theoretically issue statements clarifying their "non-recognition" of such tokens, but their ability to restrict parallel on-chain markets is quite limited. The core question is: Can a public company that cannot control the vehicle for equity trading still be considered the full governor of its equity market? This is a structural issue raised by the framework and will require time to resolve.
Opportunities and Challenges for Exchanges and DeFi from Tokenized Stocks
Looking at current market size, the growth of tokenized stocks has already built a solid foundation. By Q1 2026, spot trading volume for tokenized stocks reached $15.1 billion, surpassing the total for the entire second half of 2025. During the same period, the market cap for tokenized stocks was about $500 million, led by the tech sector. In the broader RWA market, the total on-chain value of tokenized real-world assets (excluding stablecoins) reached approximately $1.93 billion by the end of Q1 2026, more than doubling since early 2025.
For trading platforms, the most immediate benefit of this framework could be an expanded supply of assets. Once tokenized stocks gain formal recognition under a compliant framework, platforms can introduce high-quality US equities—an asset class worth roughly $93 trillion—vastly increasing the variety of on-chain tradable assets. Over the long term, 24/7 on-chain trading of securities could drive structural changes in traditional capital market operations. Since 2023, the on-chain value of RWAs has grown from about $5 billion to over $65 billion—a more than twelvefold increase—demonstrating that institutional capital is rapidly moving on-chain.
However, challenges are significant. Market fragmentation is a major concern—tokenized stocks on different blockchains may experience price discrepancies and arbitrage opportunities due to dispersed liquidity. More seriously, token prices could decouple from their underlying assets. Additionally, the anonymity of on-chain trading is structurally at odds with the KYC/AML compliance requirements of traditional securities markets. How to address this conflict during the pilot phase will directly impact the framework’s effectiveness and future scalability.
The Era of On-Chain Securities: Trends for the Next 12 to 36 Months
Based on the SEC’s disclosed policy framework, the exemption program is designed for a 12- to 36-month period as a controlled regulatory sandbox. During this window, the market is expected to go through several phases.
In the short term, within six months of the framework’s release, the first batch of tokenized stocks is expected to begin trading on compliant on-chain platforms, with Nasdaq’s approved tokenized securities trading rules serving as a key reference. In the medium term (months 12 to 24), details regarding the clearing and settlement rules between tokenized and traditional securities, cross-platform interoperability standards, and token holder rights protection systems will gradually be clarified. By the third year, if the pilot runs smoothly, the SEC may expand the exemption framework to more types of securities or elevate the temporary exemption into a permanent rule change.
Two structural variables deserve special attention: whether DTC’s "parallel track" tokenization model can expand from Russell 1000 constituents to a broader range of public companies, and whether atomic settlement between on-chain and traditional assets truly outperforms the T+1 settlement system currently being implemented. These factors will define the ultimate market impact of the framework.
Conclusion
The SEC’s forthcoming "Innovation Exemption" framework for tokenized stocks stands as one of the most significant regulatory breakthroughs in crypto asset oversight for 2026. For the first time, it provides a legitimate experimental space for third-party-led tokenized securities, allowing issuance and trading of tokenized stocks without the issuing company’s authorization—substantially expanding the compliance boundaries for on-chain securities. This framework will spark strategic competition among traditional exchanges, crypto-native platforms, public companies, and DeFi protocols. From a market perspective, the $15.1 billion spot trading volume of tokenized stocks in Q1 2026 has already laid a strong foundation for this transformation. The next 12 to 36 months of the regulatory sandbox period will determine whether on-chain securities can move from "parallel experiment" to "system upgrade," fundamentally reshaping the underlying logic of traditional capital markets.
Frequently Asked Questions
Q: What is the SEC "Innovation Exemption" framework?
A: The Innovation Exemption is a regulatory policy expected to be released by the US SEC this week, allowing third parties to create and list digital tokens linked to stock prices without authorization from the public company. The framework is a 12- to 36-month regulatory sandbox designed to test the feasibility of on-chain securities trading in a controlled environment.
Q: What is the core difference between third-party tokenized stocks and traditional stocks?
A: Third-party tokenized stocks typically do not include the full rights of traditional stocks, such as voting or dividends. They are primarily digital tools for tracking stock prices, enabling 24/7 on-chain trading and atomic settlement, but holders generally cannot exercise shareholder rights in corporate governance.
Q: What does the Innovation Exemption mean for exchanges?
A: For trading platforms, the framework provides a compliant pathway to introduce high-quality assets like US equities. However, platforms must still meet core compliance requirements such as disclosure, investor protection, and KYC/AML, and must address the risks of liquidity fragmentation across different blockchains.
Q: How large is the tokenized stock market currently?
A: In Q1 2026, spot trading volume for tokenized stocks reached $15.1 billion, with a market cap of about $500 million. The broader RWA tokenization market (excluding stablecoins) has reached approximately $65 billion on-chain.
Q: When will the framework take effect?
A: The SEC is expected to release the detailed framework as early as this week. As it is a regulatory sandbox, the framework will enter the pilot phase upon effect, with specific timelines and eligibility conditions subject to the official release.
