The US Securities and Exchange Commission has approved a pilot program for tokenized US stock trading on on-chain AMM platforms.

The U.S. Securities and Exchange Commission (SEC) has approved a temporary, conditional framework permitting a limited pilot program for trading tokenized National Market System (NMS) stocks on designated on-chain platforms. Under this new exemption, these venues—formally called Tokenized Securities Venues (TSVs)—will not immediately be classified as "exchanges" under the Securities Exchange Act of 1934 when facilitating trading of tokenized stocks via permissioned automated market makers (AMMs) and liquidity pools.

To qualify for the exemption, tokenized securities venues (TSVs) must meet four core requirements. Firstly, the platform must be a U.S. entity and in full compliance with the economic and trade sanctions enforced by the U.S. Treasury Office of Foreign Assets Control (OFAC). Secondly, the platform must establish access standards and restrict participants to eligible traders. Thirdly, synthetic stocks may not be listed: tokenized stocks must be issued by the underlying issuer or its agent, or tokenized by an unaffiliated third party, and must provide the same rights as traditional securities, including dividends and voting rights. Finally, issuers must have the opportunity to object to and prevent their securities from being traded on a specific platform.

A Controlled Experiment Aimed at Data-Driven Rulemaking

In the statement accompanying the decision, Commissioner Mark Uyeda described this exemption as a continuation of the SEC's long-standing practice of leveraging exemptive authority to foster innovation. He noted that money market funds, index funds, and exchange-traded funds (ETFs) are examples of products that emerged under similar exemptions. Uyeda believes that regulators should avoid forcing emerging technologies into traditional legal frameworks, and instead pursue technology-neutral, outcomes-oriented regulation that protects investor interests in on-chain settings.

This exemption is deliberately designed as a controlled experiment. In addition to the four main requirements, participating venues must also adhere to requirements on public notice, trade transparency, trading halt coordination, record-keeping, and technical safeguards. Furthermore, the pilot is subject to restrictions on the types of securities that can be traded and capped trading volumes, with those caps and limits adjusted according to limit-up/limit-down tiers. Importantly for market structure, the framework includes tailored exemptions for liquidity providers using proprietary capital for market making, provided they fulfill disclosure and record-keeping requirements—aiming to address the longstanding regulatory ambiguity around on-chain market making activities.

Transparency is at the core of the design. TSVs must regularly publish USD-denominated trading data, including price, size, time, pool address, pool size for the day, and daily trading volume. The objective is to reduce information asymmetry, support regulatory oversight, and generate observable data regarding how securities trading operates in an on-chain environment.

The Commission emphasized that this exemption is temporary and explicitly solicited public input, inviting detailed, data-supported comments—including metrics, case studies, event analyses, and operational narratives—to guide future rulemaking. This initiative also reflects the SEC’s Crypto Assets and Cyber Unit’s work, led by Commissioner Hester Peirce. For the tokenization industry, this decision marks the most significant step yet toward combining traditional equities with blockchain-based market infrastructure; however, its long-term effects will depend on how pilot data shapes permanent rules.