SEC's New Framework Redefines Compliance for Tokenized Stocks

The U.S. Securities and Exchange Commission's (SEC) recently updated exemptive framework for tokenized securities provides new guidance for the market while drawing clearer boundaries. The policy's core is not merely "permitting" third-party tokenized stocks, but establishing strict legal prerequisites that must be met.

Core Requirements for Compliant Tokens

According to analysis by Alex Thorn, Head of Research at Galaxy Research, to qualify for this exemption, tokenized products must meet several rigid criteria:

  • Genuine Equity Representation: The token must directly represent a stock listed on a National Market System (NMS).
  • Full Rights Transfer: Holders must possess, through the token, full legal ownership, economic benefits, and corporate governance rights identical to direct share ownership.

This excludes any financial structure that only offers price exposure without transferring substantive ownership of the underlying asset. Specifically, the following common structures do not qualify under the new exemption:

  • Notes or bonds tracking stock prices
  • Swap contracts based on stock prices
  • Equity shares in Special Purpose Vehicles (SPVs)
  • Other forms of wrapped securities

Compliance Gaps in Existing Market Models

The new rules prompt a reevaluation of some existing "tokenized stock" products in the market. Thorn points out that models offered by platforms like Robinhood, Ondo, and xStocks show significant deviations from the SEC's standards.

Take Robinhood's Stock Tokens as an example. The product is legally defined as a "tokenized debt security." The essence of this structure is that the platform issues users a debt instrument whose value is pegged to a stock's price. Crucially, users do not actually own the underlying company's shares, nor do they possess the legal rights or beneficial ownership of a shareholder. What users obtain is merely economic exposure to the stock's price movements, which is fundamentally different from the "full transfer of rights" required by the SEC.

This discrepancy is not a technical detail but a fundamental difference in the legal nature of the product. The SEC's new framework clearly aims to steer tokenized securities toward the more transparent, rights-based path of traditional securitization, rather than encouraging synthetic assets or derivative structures to circumvent regulation under the guise of "tokenization."

For the industry, the new rules present both a compliance challenge and a clarification of the correct direction for product innovation. Truly compliant tokenized stocks in the future may need to be built on more robust asset segregation, rights registration, and legal structures, placing higher demands on the legal and technical capabilities of issuers.