Corporate & Securities Blog

On September 17, 2026, the SEC issued a five-year exemptive order—the “Innovation Exemption”—which allows certain trading platforms called tokenized securities venues (“TSVs”) that use blockchain technology to trade tokenized versions of exchange-listed, national market system (“NMS”) stocks. The exemptive relief took effect immediately, and for public companies, the principal takeaway is that an unaffiliated third party can tokenize a company’s stock without its involvement, leaving the issuer only 30 days to object.

The order marks a significant step in the SEC’s effort to embrace cryptocurrency and accommodate tokenized securities markets while it considers a more permanent regulatory framework. The order applies broadly to all exchange-listed companies, not just those involved in digital-asset businesses. Importantly, the order imposes no new disclosure or compliance obligations on reporting companies and does not require any company to tokenize its stock (although it permits an issuer to do so); still, it puts the burden on issuers and their management teams to monitor for tokenization notices and establish a response strategy before one arrives.

How the Order Works

The order provides two targeted, conditional exemptions: qualifying TSVs may operate without registering as exchanges under the Securities Exchange Act of 1934 (the “Exchange Act”) for covered activity, and certain liquidity providers may operate without registering as dealers under the Exchange Act.

Issuers themselves receive no relief under the order; their only role is to generally object (or not) to tokens created by outside parties. Whether a stock is tokenized by the issuer itself or an unaffiliated third party, the tokenized security must represent actual underlying shares; accordingly, synthetic exposure products, rights, and warrants are not eligible. Token holders must also receive rights “substantially equivalent” to those of ordinary shareholders, including dividends, voting, and proxy materials, at no cost to the company. In addition, TSVs are subject to trading and volume limits, must halt trading when the primary exchange halts the underlying stock, comply with OFAC sanctions, and maintain identity-verification, wallet, recordkeeping, and other controls. The order does not alter registration requirements under the Securities Act of 1933 or provide relief under the Investment Company Act of 1940.

The 30-Day Objection Window

Before trading a third-party token, a TSV must send written notice to the issuer’s principal executive office address or email shown on the cover page of its Exchange Act filings. The issuer then has 30 calendar days to object in writing, without a prescribed form or stated reason. A timely objection bars that TSV from trading the token, but does not prevent the tokenization itself or trading on another venue, meaning issuers may receive and need to evaluate multiple notices. Objections are public, and the TSV must disclose any issuer objection within 5 business days of its receipt thereof. The order does not address whether an objection may later be withdrawn or whether a TSV may restart the notice process. Absent a timely objection, trading of the tokenized security may begin. As a result, the market may deem an issuer’s failure to respond to a notice as its consent to tokenization.

Risks to Consider

Tokenized trading presents practical and legal considerations that issuers should assess in light of the SEC’s new order, including potential price divergence between tokenized and traditional shares during 24/7 trading, uncertainty regarding voting and corporate actions, sanctions and anti-money laundering concerns, more complex shareholder records and communications, and potential litigation or reputational exposure arising from third-party activity. Finally, companies should look out for unauthorized, synthetic, or otherwise noncompliant tokens that fall outside the order, as the remedies available against them may be uncertain or costly to pursue.

Capital Markets Considerations

Tokenized trading may also affect offerings, Regulation M restricted periods, stabilization, lock-ups, hedging, repurchases, and tender offers. TSVs cannot be used for primary issuances, and trading by an issuer or affiliate in its own tokens may raise registration, Regulation M, and manipulation concerns and may fall outside the Rule 10b-18 buyback safe harbor. Issuers and underwriters should also consider whether tokenized trading could affect investor interest in capital-raising transactions. Moreover, because TSVs may trade 24/7, companies listed on TSVs may wish to consider moving material announcements from post-market to before the market opens.

Going forward under the SEC’s exemptive order, issuers should consider taking the following actions:

• Confirming the accuracy of contact information in SEC filings, and establishing procedures to route TSV notices promptly to the relevant management and/or legal teams.
• Prepare a form objection and an internal escalation protocol before a notice is received.
• Develop a preliminary position before any notice arrives and prepare related diligence questions, including how the TSV addresses custody, voting, corporate actions, redemption, and compliance.
• Brief the board and establish criteria for evaluating whether to object.
• Coordinate investor relations and disclosures, including FAQs and alerts about unauthorized tokens, and consider whether on-chain trading should be mentioned in periodic reports.
• Determine the company’s general posture toward tokenization: whether to object as a matter of policy, engage on a case-by-case basis, or explore tokenizing the company’s own shares with a reputable partner on terms it can control.
• Consider participating in the SEC’s public comment process, including on the 30-day objection period and other practical implementation issues.