SEC approves trading of tokenized securities in US market through five-year Innovation Exemption

The Securities and Exchange Commission just did what Congress couldn’t. On September 17, the SEC announced a temporary “Innovation Exemption” that permits the trading of tokenized versions of US equities on blockchain-based platforms, sidestepping the legislative gridlock that killed the CLARITY Act in the Senate earlier this year.

The exemption allows newly designated Tokenized Securities Venues, or TSVs, to facilitate onchain trading of National Market System stocks using permissioned automated market makers. Translation: platforms can now match buyers and sellers of tokenized stocks on a blockchain without needing to register as traditional exchanges.

What the exemption actually does

TSVs can list tokenized versions of equities within the Russell 1000 index and certain ETFs. These digital twins must carry identical rights to their traditional counterparts, including dividends and voting rights.

The exemption lasts five years, giving the SEC a built-in sunset clause. During that window, TSVs must comply with US person verification, sanctions screening, and public reporting requirements.

Liquidity providers operating on these venues also get a meaningful carve-out: they’re exempt from dealer registration requirements.

One notable guardrail: corporate issuers retain the ability to block the tokenization and listing of their own securities on TSVs.

Why the SEC moved without Congress

The timing is no accident. The CLARITY Act, which aimed to create a comprehensive market structure framework for digital assets, recently failed to advance in the Senate. That left a regulatory vacuum that SEC Chairman Paul S. Atkins apparently decided to fill through administrative action rather than wait for lawmakers to find consensus.

Atkins characterized the exemption as a “crucial step toward modernizing capital markets.”

Earlier in 2026, the agency approved Nasdaq’s rule changes related to tokenized trading, signaling that the institutional plumbing for blockchain-based equity markets was already being laid. The Innovation Exemption builds on that foundation, extending the framework beyond a single exchange to an entire class of new venues.

The Commission is also soliciting public commentary on all aspects of the exemption to generate a formal record that could inform future rulemaking.

What this means for markets and investors

For retail investors, tokenized securities can enable fractional ownership and self-custody options that traditional brokerage accounts don’t easily support.

For institutional players, blockchain settlement can compress the trade lifecycle from the current T+1 standard to near-instantaneous finality, freeing up capital currently locked in clearing and margin requirements.

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