The U.S. SEC grants a five-year innovation exemption: licensed AMM can pilot real U.S. stock tokens

Author: Wu Says Blockchain, Grok, etc.

On September 17, local time, the U.S. Securities and Exchange Commission (SEC) issued an order approving a temporary and conditional "Innovation Exemption." Qualified tokenized securities trading venues (TSVs) can conduct limited pilot trading of tokenized National Market System stocks (NMS stocks) in licensed automated market makers (AMMs) and liquidity pools. The exemption will expire five years from the date of announcement and is simultaneously open for public comment.

The order provides two types of relief: TSVs are not directly recognized as "exchanges" under Section 3(a)(1) of the Securities Exchange Act of 1934; and certain entities that contribute proprietary funds to AMM pools and provide liquidity for tokenized NMS stocks are not directly recognized as "dealers" under Section 3(a)(5). This is based on the exemption under Section 36(a)(1) of the Act. All anti-fraud and anti-manipulation provisions apply.

Chairman Paul Atkins placed this move in the context of legislative gridlock in Congress: "Earlier this week, Congress failed to advance the CLARITY Act. Therefore, today, the SEC takes an important step within its statutory authority." He also clarified that this is only a transition, "lasting rules must follow."

What the Order Opens Up and What It Closes Off

TSVs are defined as a new type of venue: providing one or more AMM liquidity pools that allow authorized participants to trade within the pools and set their own access criteria. Entry and exit are licensed, but smart contracts must be deployed on a public, permissionless distributed ledger that is auditable and publicly accessible. The underlying technology is a public blockchain, and participants must meet access criteria.

The underlying assets are limited to tokenized NMS stocks. Tokens can be issued by the issuer (or its representative) or by unrelated third parties, but holders must enjoy the same rights as traditional stocks, including dividends and voting. Atkins specifically noted "No Synthetics": synthetic tokens that provide price exposure but not shareholder rights are not included in this scope.

Third-party tokenization has a separate issuer veto. Before such assets are listed on TSVs, written notice must be given to the issuer, providing an opportunity to object; multiple reports specify that the notice period is at least 30 days, and if there is an objection, trading is not allowed, with silence interpreted as consent. If an issuer does not want its stock to appear on a TSV, it can withdraw directly.

Hard conditions also include: TSVs must be U.S. entities and comply with OFAC sanctions; only individuals who meet access criteria are allowed to trade; trading must halt in sync with the primary listing exchange; and announcements regarding operations, trading, and related party activities must be made publicly. Commissioner Mark Uyeda added requirements for public notice, record-keeping, and technical security. The number of tradable codes and trading volume are limited, and calibrated according to price fluctuation limits (LULD). Transaction data priced in U.S. dollars—price, quantity, time, liquidity pool address, end-of-day pool size, daily trading volume—must be disclosed periodically. Entities that believe they meet the criteria can notify the SEC to begin operations without first going through full exchange registration.

Jamie Selway, Director of the Market Regulation Division, stated that this is a "milestone for opening capital markets to tokenized securities," and the division is prepared to engage with entities interested in operating TSVs.

Conclusion: What is opened up are U.S. entities, licensed participants, auditable AMM pools on public blockchains, listed stock tokens with full shareholder rights, with volume limits and a five-year observation period; what is not opened up are synthetic stock tokens, securities trading pools with unrestricted access, and the establishment of TSVs as permanent exchanges.

How This Path Led to September 17

The industry has been stuck on the definitions of "exchange" and "dealer." Rules are written based on order books and registered venues, and applying them to AMMs either twists the protocol into a traditional exchange or leaves projects in legal uncertainty. Uyeda traced this exemption back to the SEC's old path: money market funds, index funds, and ETFs all started with limited exemptions before developing permanent rules. Congress expanded the general exemption in the National Securities Markets Improvement Act precisely to adjust rules to new forms when the existing requirements "do not fit."

Atkins connected the timeline to his tenure's "Project Crypto": launched about a year ago, the goal is to enable federal securities laws to support market migration to the blockchain. From March to April 2026, Nasdaq, NYSE, and others have been authorized to tokenize within existing clearing systems, still passing through infrastructure like DTCC. The industry subsequently sought another channel—one that does not require transforming AMMs into traditional exchanges to facilitate secondary trading of listed stocks on-chain.

The channel was pressed in May. At that time, reports indicated that the launch was delayed due to opposition from exchanges and other entities regarding third-party synthetic tokens. Peirce clarified on X that she "always expected the scope to be narrow, only facilitating digital representations of the same underlying equity that investors can buy in the secondary market today, rather than synthetic products." Robert Leshner, founder of Superstate, told The Block at the time that the framework focuses on issuer-led tokens and tokenized rights provided by SEC-registered entities.

Legislative progress was nearly simultaneous. The House had passed the CLARITY Act, and the Senate procedural vote on September 15 was 49 to 50, failing to reach the 60 votes needed for further consideration. The next day, Atkins stated that regardless of legislation, the SEC would act within its existing powers. Two days later, the exemption was finalized.

Overseas, there have been precedents: Coinbase, Robinhood, Kraken, and others provide tokenized stocks abroad. Within the U.S., models like Robinhood have publicly clashed with AMC, bringing "only price exposure, no voting or dividends" to the forefront. In July, the Securities Transfer Association urged that issuer authorization be written as a threshold. The order on the 17th closed this line: allowing third-party tokenization, but requiring full shareholder rights to be honored and giving issuers a veto. An SEC spokesperson made no commitments regarding the future of synthetic tokens, stating only that this response addresses the demand for "doing securities tokens in compliance in the U.S." and that "interest on the derivatives side has been minimal."

Reactions After the Release

Atkins described the exemption as "a bridge to lasting rules," listing four points: compliance with sanctions, licensed access, prohibition of synthetics, and issuer veto rights, reminding not to codify today's technology into tomorrow's standards.

Peirce issued a statement titled "Slumber Number," using the bed of Procrustes as a metaphor: it is not about changing people to fit a bed, but changing the bed to fit the person sleeping. She wrote that this is an intermediate step toward permanent rules, first observing how on-chain and traditional markets interact. A particularly sensitive segment for the industry is:

"This order has nothing to do with decentralized finance. Truly decentralized systems driven by automated software do not raise the fundamental concerns of securities law—namely, that the intermediaries you entrust to act may be foolish, negligent, or corrupt. Investors engaging in peer-to-peer transactions using permissionless smart contracts do not require an exemption."

She also wrote that the commission will not preemptively classify any entity invoking the exemption as an "exchange" or "dealer"; if a certain model can fall under the existing Securities Exchange Act, it may not need to apply for an exemption at all.

Uyeda leaned more toward methodology: using the number of codes, volume limits, and public transaction data to confine the pilot within an observable framework before determining long-term rules. He specifically welcomed comments that include metrics, case studies, incident analyses, and real trading records.

Uniswap founder Hayden Adams stated on X that for AMMs, the most important aspect of the day was not the text of the declaration but Peirce's accompanying opinion. "No exemption needed," in his view, refers to the ordinary permissionless Uniswap; the exemption applies to the licensed liquidity pools on Uniswap v4, providing a U.S. pathway when assets and users need compliant channels. He indicated that this would help AMMs gain adoption, and Uniswap would submit a comment letter with suggestions for improvements.

Ryan VanGrack, Vice Chairman of Coinbase and former SEC official, wrote: "As expected, clear rules are coming. Today's clarity comes from Atkins, not Congress." Reuters noted that several companies, including Coinbase, have stated plans to launch tokenized stocks in the U.S. once rules allow.

Supporters see this as the first time AMMs and on-chain liquidity pools have been recognized by U.S. federal securities regulation as mechanisms capable of facilitating trading in listed stocks. The reservations are equally clear: licensing keeps anonymous, permissionless securities trading at bay; synthetic tokens have not received a commitment on "how to handle next steps"; and the issuer veto could leave the most in-demand names absent initially. Peirce herself acknowledged that the order's limitations "may make people yawn"—it was never intended to be a universal pass for the entire market.