Winners and losers of the SEC’s new tokenized stocks rules

The SEC has opened a five-year path for tokenized stocks in America, but only a select few products and venues fit the bill. Robinhood's CEO, Vlad Tenev, hailed the news, signaling a positive market reaction. Bitcoin (BTC) and Ethereum (ETH) jumped over 10%, while Uniswap's UNI token surged more than 30% after the SEC's Innovation Exemption announcement.

However, most existing tokenized stocks do not qualify for the new rules. The SEC's five-year Innovation Exemption allows certain venues to trade tokenized National Market System (NMS) stocks onchain without registering as a securities exchange, and for third parties to tokenize stocks, but only under specific conditions. The tokens must confer the same "rights and privileges" as the underlying shares, and trading venues must authenticate users and pools.

Not all tokenized stocks are created equal. A token can resemble a share and mirror its price without granting shareholders the rights of a share. Under the new rules, this would be classified as a synthetic stock and deemed non-compliant. Consequently, some industry giants may have an advantage while others need to catch up.

Peter Curley, Ondo Finance's head of global regulatory affairs, noted that not everything the company does will align with the SEC's requirements. Nevertheless, the SEC's move marks a significant step forward, allowing for onchain stock trading with specific conditions. To qualify, a tokenized stock must provide holders with the same dividends and voting rights as the underlying security.

If a third party tokenizes a stock without affiliation, the issuing company can reject the token before it can be traded, ruling out synthetic exposure.

Commissioner Hester Peirce emphasized that the exemption applies to a specific model rather than all possible ways of trading tokenized securities. However, she indicated that the SEC is open to other models outside the TSV structure.

Robinhood's Stock Tokens and Kraken's xStocks do not qualify for the SEC's exemption in their current forms, as they represent synthetic exposure. Meanwhile, Coinbase's tokenized stock offering is limited to non-US customers, and its infrastructure is based on a central limit order book, which differs from the SEC's preference for permissioned AMM liquidity pools.

In contrast, Ondo Finance and Uniswap appear to have more favorable setups. Ondo launched tokenized US securities in June, with traditional custody and onchain entitlements for investors. Uniswap introduced Permissioned Pools in July, enabling regulated assets to trade through AMMs with onchain compliance enforcement. This infrastructure aligns with the SEC's requirements, potentially paving the way for Uniswap's v4 infrastructure to be adapted for tokenized stock trading.