SEC Commissioner Peirce Details Innovation Exemption for Onchain Trading of Tokenized Stocks

Key Takeaways

• The SEC issued an order creating time-limited exemptions that allow tokenized National Market System (NMS) stocks to trade onchain through a new category of entity called "tokenized securities venues" (TSVs).
• TSVs are exempt from the Exchange Act definition of "exchange," and certain liquidity providers are exempt from the definition of "dealer." Compliance teams at broker-dealers, trading venues, and issuers should assess whether to participate, how to opt out, and how to prepare for the permanent rules that will follow.

Deep Dive

The SEC issued an order creating time-limited exemptions that allow tokenized National Market System (NMS) stocks to trade onchain through a new category of entity called "tokenized securities venues" (TSVs). TSVs are exempt from the Exchange Act definition of "exchange," and certain liquidity providers are exempt from the definition of "dealer." Compliance teams at broker-dealers, trading venues, and issuers should assess whether to participate, how to opt out, and how to prepare for the permanent rules that will follow.

It creates the TSV category, which provides automated market maker (AMM) liquidity pools and sets participant access standards. TSVs are exempt from the "exchange" definition, and certain liquidity providers are exempt from the "dealer" definition under the Securities Exchange Act of 1934. The exemptions cover tokenized NMS stocks and are available to U.S. persons, including incumbents and new entrants. Issuers may opt out of having their stock trade on TSVs. TSVs may use various pricing mechanisms beyond the constant product formula, including external pricing sources and market data (see section III of the order). The order also follows the April 13, 2026 Division of Trading and Markets staff statement on broker-dealer registration for user interfaces used to prepare crypto asset securities transactions.

Several points limit the relief. The exemptions are temporary, and the statement gives no specific expiration date or deadlines, so the order itself must be checked for duration and any compliance dates. The Commission has expressly declined to presume that TSVs or liquidity providers are "exchanges" or "dealers" simply because they rely on the exemptions. The regulatory classification of these entities is therefore unresolved, and the Commission will observe usage before drawing conclusions. The order does not address decentralized finance. Truly decentralized, permissionless peer-to-peer smart contract trading is described as not requiring an exemption. Other models may be considered, and models that fit within existing Exchange Act requirements need no exemption. The Commission also invites public input on permanent rules.

Recommended actions:

(1) obtain and review the full order, including conditions, definitions, and duration;

(2) determine whether the firm intends to act as a TSV, a liquidity provider, or a participant, or to route orders to TSVs, and assess Regulation NMS, best execution, and surveillance implications;

(3) for issuers, evaluate the opt-out process and its governance;

(4) assess custody, smart contract, wallet, and cybersecurity controls for onchain activity;

(5) review AML/sanctions controls for pseudonymous onchain participation;

(6) consider submitting comments and engaging with staff on alternative models; and

(7) monitor for follow-on guidance and permanent rulemaking.

The exemptions lower one barrier to entry but carry significant uncertainty. Regulatory status may change when permanent rules are adopted, and reliance on exemptions creates conditions-compliance and unwind risk. Novel operational, market integrity, and investor protection risks arise from onchain settlement, AMM pricing, and the interaction between onchain and traditional markets. Firms should document the legal basis for any participation and prepare for supervisory scrutiny, since the Commission is explicitly using this period to observe activity.

Source: Securities and Exchange Commission