- The World Federation of Exchanges urges the SEC to restrict exemptions for crypto platforms offering tokenized stocks.
- Concerns arise over tokenized stock products marketed without proper investor protections.
- The SEC is considering a Sandbox framework to grant temporary regulatory relief to crypto firms.
The World Federation of Exchanges sent a letter last week to the U.S. Securities and Exchange Commission’s Crypto Task Force. The federation, which includes members like Nasdaq, Cboe, and CME Group, asked the SEC to eliminate special exemptions for crypto platforms that offer tokenized stock products. These exemptions, known as exemptive relief, allow companies to bypass certain legal requirements when deemed in the public interest and safe for investors.
The federation expressed alarm at the numerous brokers and crypto trading platforms marketing tokenized U.S. stocks. A position paper published in August supports this concern, noting that such products are “marketed as stock tokens or the equivalent to stocks when they are not,” as stated in the letter signed by CEO Nandini Sukumar. The federation emphasized that while it supports the principle of exemptive relief, its broad application poses risks to investors and market integrity.
Exemptive relief is a regulatory process that can temporarily or permanently exempt firms from some rules when the SEC finds it appropriate. The federation supports its use only when necessary for fair competition and consistent with public and investor protection interests.
Meanwhile, the SEC is exploring a sandbox-style framework. This system would grant time-limited exemptive relief to crypto platforms offering tokenized stocks, enabling products to be piloted under SEC oversight. Chair Paul Atkins mentioned in October that the SEC is considering formal innovation exemptions to temporarily ease rules for crypto firms. The framework could be introduced within the year.
Past attempts to launch tokenized stock products in the U.S. have faced scrutiny, including Robinhood’s controversial effort to offer blockchain-based equities via a European partner.
The letter from the World Federation of Exchanges can be accessed here, and their position paper on tokenized equities is available here.
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