SEC Token Exemption Carries Hard Stop Conditions

On Sept. 17, 2026, the SEC issued an order exempting tokenized stock venues from the definition of "exchange," linking on-chain trading to traditional market hours. According to the order, a Tokenized Securities Venue (TSV) is required to cease trading a tokenized stock precisely when the underlying stock halts on its primary listing exchange.

This requirement for concurrent stoppage is one of six conditions tied to the temporary relief. By granting exemptive relief, the SEC allows TSVs to trade tokenized National Market System stock via permissioned automated market makers. These exemptions will lapse five years after publication in the Federal Register.

“SEC Chairman Paul S. Atkins stated that the body is acting within its statutory authority to facilitate onchain trading of certain tokenized stocks through the ‘Innovation Exemption,’ a significant step forward to bring America’s capital markets into the digital age,” he said.

Apart from the stoppage rule, the order enforces structural constraints on TSV operations. The smart contracts utilized by these venues must be public, auditable, and situated on a public, permissionless distributed ledger. Furthermore, TSVs are obligated to confirm that tokenized shares grant holders identical rights and privileges to those of traditional NMS stock. Additionally, the SEC provided a temporary dealer exemption for liquidity providers in AMM pools, permitting them to quote prices or commit capital using proprietary capital, contingent upon satisfying specific indicia of dealing activity.