SEC Launches “Innovation Exemption” for Tokenized Stocks
On September 17, 2023, the U.S. Securities and Exchange Commission (SEC) announced the “Innovation Exemption,” allowing blockchain platforms to operate markets for tokenized versions of real, exchange-listed U.S. stocks without registering as stock exchanges. This five-year initiative enables 24/7 trading with near-instant settlement, while ensuring tokenized stocks carry the same dividends and voting rights as traditional shares.
The SEC has set strict limits on the scope of these trading venues, or Tokenized Securities Venues (TSVs). Each TSV can only offer a maximum of 75 of the largest stocks and can trade no more than 0.25% of an individual stock’s normal daily volume. For instance, if Apple typically trades 50 million shares daily, a TSV can only handle 125,000 shares. Companies also have the option to opt-out of tokenization with 30 days’ notice.
The initiative’s first venues are expected to commence operations as early as next quarter, with the SEC seeking public feedback on the program through its duration, which expires in September 2031.
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