SEC Pushes Back "Innovation Exemption" for Tokenized Trading of U.S. Stocks

The U.S. Securities and Exchange Commission did not publish its long-anticipated framework for allowing crypto platforms to trade tokenized versions of U.S. equities during the expected May 18–22 window, opting instead to delay the initiative. The agency has postponed its proposed "innovation exemption" after sharp feedback from major stock exchanges and other market participants, who questioned investor-protection safeguards and warned the plan could tilt competition in favor of crypto venues. At the center of the proposal was a streamlined regulatory path for crypto platforms and decentralized finance protocols to trade blockchain-based representations of public-company shares—tokenized exposures to names such as Apple, Tesla, and Nvidia. The draft framework also envisioned round-the-clock trading, fractional ownership, and faster settlement. One of the most contested elements would have permitted third-party tokenization without requiring approval from the underlying issuer. In practice, a party could create and trade a blockchain version of Tesla stock on a crypto exchange without Tesla's consent. Reports also suggested the package could have included limited relief from certain broker-dealer requirements. Nasdaq and the New York Stock Exchange, along with other industry voices, raised concerns about investor protection and market structure. Securitize President Brett Redfearn pointed to the risk of market fragmentation, particularly if tokenized versions of shares can be created without issuer involvement. The SEC has not scrapped the concept, but has set it aside for additional internal review and has not provided a new timeline for when an updated framework might be released. The delay stands out given the SEC's more crypto-friendly posture in recent months. Chair Paul Atkins, who took office in mid-2025, has publicly backed tokenization, describing blockchain-based securities as an evolution of capital markets. For investors tracking tokenized securities, the pause extends regulatory uncertainty. With no formal guidance in place, the legal status of trading tokenized versions of widely held equities remains unclear, and platforms preparing for the exemption now face an open-ended wait as the SEC reassesses its approach.