Key Highlights
- Global stock exchanges urged the SEC to stop giving special exemptions to crypto firms selling tokenized stocks.
- The World Federation of Exchanges warned that tokenized stocks could mislead investors and harm market trust.
- The SEC is considering a sandbox to let crypto firms test tokenized stocks under supervision.
A global group of stock exchanges has asked the U.S. Securities and Exchange Commission (SEC) to stop giving special exemptions to crypto companies that want to sell tokenized stocks.
The letter, sent last week by the World Federation of Exchanges (WFE), which includes big names like Nasdaq, Cboe, CME Group, and Germany’s Deutsche Börse, warns that these exemptions could put investors at risk and hurt market trust.
Why are stock exchanges concerned
In the letter, WFE CEO Nandini Sukumar said the federation is “alarmed” by brokers and crypto platforms offering or planning to offer tokenized U.S. stocks. She added, “The SEC should avoid granting exemptions to firms attempting to bypass regulatory principles that have safeguarded markets for decades.”
Tokenized stocks are crypto tokens linked to real stocks, but they are not actual equities themselves. Some platforms market them as if they were real stocks, which worries the federation.
Exemptive relief allows companies to temporarily or permanently skip certain SEC rules if the regulator believes it serves the public interest and does not harm investors. The WFE said it supports using relief only in limited cases where it is truly needed, ensuring fairness and safety for all market participants.
The push comes as the SEC considers a sandbox framework. This framework would let crypto platforms try selling tokenized stocks for a limited time while under SEC supervision.
SEC Chair Paul Atkins said the agency is exploring “innovation exemptions” that would allow crypto companies to test new ways of doing business without breaking the law. Earlier attempts to launch tokenized stocks, like Robinhood’s plan with a partner in Europe, faced a lot of scrutiny.
Tokenization: Opportunities and risks
WFE emphasized that tokenization can be “a natural evolution in capital markets” but stressed that both crypto platforms and traditional exchanges must follow the same rules.
James Auliffe, head of WFE’s technology working group, said in the letter, “We and the crypto platforms should be competing on a level playing field. We should be subject to the same rules.”
Kanny Lee, CEO of SecondSwap, added that when done right, tokenization can “open the door for global access for participation in the world’s largest equity market,” but investors must know they have the same protection everywhere.
