SEC Grants Five-Year Innovation Exemption for Onchain Trading of Tokenized US Stocks

The US Securities and Exchange Commission has opened a regulated, temporary pathway for US stocks to trade on public blockchains. On September 17, 2026, the agency issued an order establishing a five-year "Innovation Exemption" that grants conditional relief from exchange registration to a new category of platform called Tokenized Securities Venues (TSVs), allowing them to facilitate onchain trading of tokenized US stocks through automated market makers and liquidity pools, according to reports from The Block and The Defiant.

SEC Chair Paul Atkins tied the decision directly to stalled legislation. "Earlier this week, Congress was unsuccessful in advancing the CLARITY Act despite the tireless efforts of many. So today, the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America's capital markets into the digital age by facilitating onchain trading of certain tokenized stocks through the 'Innovation Exemption,'" Atkins said, as reported by Decrypt.

What the Innovation Exemption allows

Under the framework, qualifying liquidity providers that use their own capital receive conditional relief from dealer registration requirements, alongside the exchange-registration relief granted to the venues themselves, per CryptoSlate. TSVs must run on public, auditable blockchains, but access to the venues themselves must remain permissioned, according to Cointelegraph.

The conditions come with hard guardrails. TSV platforms are prohibited from offering leverage and lending activities, per Blockonomi, and crypto.news reported that trading on tokenized venues must halt immediately if the primary traditional exchange suspends trading. Venues also face transparency obligations: data such as prices, trade sizes, timestamps, and pool addresses must be regularly published in US dollars, according to Cointelegraph.

Volume caps and automatic pauses

The pilot is deliberately narrow. Trading volumes are restricted to 0.25% of average daily trading volume across up to 75 Tier 1 symbols and 2.5% across up to 250 Tier 2 symbols, according to The Defiant and CoinCentral. The Defiant further reported that the order is designated Release No. 34-106402 and that exceeding a volume cap triggers an automatic three-month pause in that security.

"The Innovation Exemption is designed to be controlled," Commissioner Mark Uyeda said, as quoted by Cointelegraph. Uyeda announced the regulatory move in a statement, per Crypto Briefing.

Issuer veto rights and the synthetic-token ban

Public companies keep control over whether their shares go onchain. Issuers must receive written notice and have a 30-day window to object to and veto third-party tokenization of their shares on a venue, according to Finance Magnates and Decrypt.

The exemption also strictly excludes synthetic derivatives that merely track stock prices: eligible tokens must carry identical legal rights to the underlying shares, including voting and dividend rights, per The Defiant. That requirement matters for products already on the market. Finance Magnates reported that xStocks and Binance bStocks currently offer only economic exposure without direct shareholder rights, likely excluding them from the new regime.

Hester Peirce drew a boundary around the order's scope in remarks reported by The Defiant: "This order is not about decentralized finance. Truly decentralized systems that are driven by automated software do not give rise to the foundational concerns underlying securities regulation."

A response to the CLARITY Act's failure

The regulatory relief follows the US Senate's failure to advance the CLARITY Act crypto market-structure bill after a 49-50 vote, as reported by The Block. The SEC was not the only regulator to act: The Defiant reported that the Commodity Futures Trading Commission issued staff no-action letter 26-25, expanding relief for passive software providers from registering as introducing brokers under ten conditions.

What happens next

The exemptions are temporary. According to Finance Magnates, they expire on September 17, 2031, and venue operators must be US persons complying with strict controls. In the meantime, the SEC is seeking public feedback on the framework to inform future rules, per Cointelegraph.

Key takeaways

• The SEC issued a five-year Innovation Exemption on September 17, 2026, letting Tokenized Securities Venues trade tokenized US stocks onchain via automated market makers and liquidity pools.
• Trading is capped at 0.25% of average daily trading volume across up to 75 Tier 1 symbols and 2.5% across up to 250 Tier 2 symbols.
• Issuers get written notice and a 30-day window to veto third-party tokenization of their shares.
• Synthetic tokens are excluded; eligible tokens must carry voting and dividend rights identical to the underlying shares.
• Leverage and lending are prohibited on the venues, and access must remain permissioned even though the blockchains themselves are public and auditable.

Frequently asked questions

Do synthetic stock tokens qualify under the exemption?

No. The framework excludes synthetic derivatives that merely track stock prices. Tokens must carry identical legal rights to the underlying shares, including voting and dividend rights.

Can a company stop its shares from being tokenized?

Yes. Issuers must receive written notice and have a 30-day window to object to and veto third-party tokenization of their shares on a venue.

When does the Innovation Exemption end?

Finance Magnates reported that the exemptions expire on September 17, 2031, giving the SEC a five-year window to study onchain trading before any permanent rulemaking.