SEC Grants Conditional Exemption for Tokenized Stocks; CFTC Extends Relief to Passive Software Providers

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) each issued regulatory exemptions on Thursday, providing a limited framework for on‑chain trading of tokenized equities and for software that connects users to futures markets.

SEC’s Tokenized Securities Venue exemption

The SEC granted a five‑year, conditional exemption that creates a new category called a Tokenized Securities Venue (TSV). Under this order, tokenized National Market System (NMS) stocks may be traded on permissioned automated market makers (AMMs) that operate on public blockchains.

• Exemption applies to up to 75 Tier 1 symbols (S&P 500 and Russell 1000 constituents) with a volume cap of 0.25% of the prior month’s average daily share volume.
• Tier 2 covers up to 250 additional NMS stocks with a 2.5% volume cap.
• Violating a cap triggers a three‑month trading pause for that security.
• Venues must run publicly auditable smart contracts, halt trading when the underlying exchange halts the stock, and publish transaction data in near‑real‑time.
• Issuers retain veto power: a venue must notify the issuer and wait 30 days before listing a third‑party tokenized stock; an objection blocks the listing.

CFTC’s passive‑software no‑action relief

The CFTC’s Market Participants Division issued a staff letter extending a no‑action position to providers of passive front‑end software that routes user orders to registered futures commission merchants, introducing brokers, or designated contract markets.

• Providers are not required to register as introducing brokers under the Commodity Exchange Act.
• Ten conditions apply, including disclosure of broker relationships, risk statements, compliance policies, and a joint‑liability undertaking.
• The relief follows an earlier letter granted to Phantom Technologies and now opens the path to other software firms.

Market reaction and industry response

Uniswap’s UNI token rose 19.8% in 24 hours, trading around $7.37, while Bitcoin was near $76,558, up 1.2%.

Industry groups welcomed the SEC’s “Innovation Exemption” as a step toward modernizing capital markets, while the Securities Industry and Financial Markets Association cautioned that broad exemptions could create parallel trading ecosystems.

Next steps

The SEC’s order expires after five years and may be amended or withdrawn. The CFTC’s no‑action stance binds only the issuing division. Both agencies have opened comment periods on the exemptions and on related rulemaking proposals.