SEC's Plan B: Tokenized US Stocks Get Five-Year Innovation Exemption

Original author: Xiao Bing

Two days after the CLARITY Act fell 49-50 in the Senate, SEC Chairman Paul Atkins unveiled Plan B.

On September 17, the SEC issued Order 34-106402, officially titled the "Innovation Exemption." The order grants a new class of market participants, "Tokenized Securities Venues" (TSVs), a five-year conditional exemption allowing them to trade tokenized National Market System stocks (NMS Stocks) on public blockchains through permissioned AMM liquidity pools without registering as national securities exchanges.

Atkins said in a statement: "This step aims to bring U.S. capital markets into the digital age."

Nine Conditions: The Framework Is Stricter Than Expected

The "Innovation Exemption" is not a blank check; the SEC has set nine thresholds for TSVs:

U.S. Entity. TSVs must be incorporated and have offices in the United States. Offshore entities are not eligible.

Permissioned Access. Every participant (traders and liquidity providers) must be vetted before accessing the platform. Anonymous trading is explicitly prohibited.

Auditable Smart Contracts. All smart contracts must be deployed on public, permissionless distributed ledgers, publicly accessible and auditable.

Full Shareholder Rights. Holders of tokenized stocks must enjoy exactly the same rights as traditional shareholders, including dividends, voting rights, and participation in corporate actions. Synthetic products are explicitly excluded.

Issuer Notification and Objection Rights. TSVs must provide 30 days' written notice to issuers before listing a tokenized stock. If the issuer objects, the stock cannot be listed for trading. Silence is deemed consent.

Trading Instruments and Volume Caps. The number of tokenized stocks that can be traded and total trading volume are both limited (specific figures to be refined by the SEC later).

Synchronized Trading Halts. When the underlying NMS stock triggers a trading suspension, the tokenized version must halt simultaneously.

Sanctions Compliance. TSVs must comply with U.S. sanctions regulations and implement corresponding access restrictions.

Anti-Fraud Provisions Fully Apply. Anti-fraud and anti-manipulation provisions under federal securities laws fully apply to tokenized stock trading.

Meanwhile, the SEC provided conditional broker-dealer registration exemptions for TSV liquidity providers, meaning institutions that inject capital into AMM pools do not need to register as securities broker-dealers if they meet the conditions.

A Direct Response to the CLARITY Act's Failure

On September 11, Coinbase CFO Alesia Haas said at a Goldman Sachs conference that there are three paths to regulatory clarity: congressional legislation, regulators making rules themselves, and court precedents. If the CLARITY Act fails, Coinbase believes SEC and CFTC rulemaking at the agency level can still move forward.

On September 15, the CLARITY Act was rejected 49-50.

On September 17, the SEC issued the "Innovation Exemption."

From the CLARITY Act's defeat to the SEC's action, only 48 hours passed. Atkins fulfilled his promise made on the day of the CLARITY Act vote: "With or without legislation, the SEC will deliver results for investors and innovators."

When Congress cannot pass laws, administrative agencies can fill the void with exemption orders and administrative rules. This path is faster and more flexible, but also more fragile—exemption orders can be revoked, and administrative rules can be overturned by the next administration. If the CLARITY Act had passed, the legal status of tokenized securities would be written into federal law and not easily revoked; an administrative exemption is a temporary pass with a five-year validity period.

Who Are the Winners?

Securitize. Its model tokenizes directly at the issuer's shareholder registry level, making token holders legal shareholders, fully compliant with SEC requirements. The NYSE is working with Securitize to develop a tokenized stock trading platform, and this exemption order gives it the long-awaited federal-level compliance endorsement.

Coinbase. If it can complete the promised upgrades to voting rights and redemption rights, making its tokenized stocks meet the "full shareholder rights" standard, Coinbase is eligible to apply to become a TSV. It has already claimed that its token holders have actual ownership of the underlying stocks, closer to the SEC's line than Robinhood's legal structure.

Robinhood Chain and ARB.

Robinhood's current Stock Token legal structure is non-compliant, but Robinhood has the strongest incentive to upgrade—its tokenized stock business covers over 2,000 stocks and more than 120 countries, a core pillar of its growth narrative.

Once Robinhood upgrades Stock Tokens from "Jersey synthetic exposure" to "true tokenized stocks" that meet SEC requirements, the most natural deployment environment is Robinhood Chain. The SEC requires smart contracts to be deployed on "public, permissionless distributed ledgers," and Robinhood Chain is built on Arbitrum Orbit with settlement back to Arbitrum One, exactly meeting this requirement.

If trading of thousands of tokenized U.S. stocks ultimately occurs on Robinhood Chain, on-chain trading volume and fee revenue will far exceed the current meme-coin-dominated structure. Recall Standard Chartered's $10 price target for ARB, whose core argument is revenue growth from Orbit chains.

Arc Chain. Circle's Arc chain uses USDC as native gas, with sub-second finality and a compliant privacy layer. If TSVs choose to deploy tokenized stock trading on public chains, Arc is currently one of the most institution-grade options meeting SEC requirements for public, permissionless distributed ledgers plus auditable smart contracts.

Short Direction: Pure Synthetic Models. Those tokenized stock products that only provide price exposure without granting shareholder rights now face a clear regulatory watershed. They cannot participate in the TSV framework, meaning they will continue to operate in a gray zone. The SEC's order does not ban them, but it shines the light of compliance clearly on another category of products.

The SEC explicitly stated that this is a transitional arrangement, and during the exemption period it will collect actual market data to decide whether to establish permanent rules. The SEC also opened a public comment period.

The five-year window means that 2026 to 2031 will become an "experimental sandbox period" for tokenized securities. During this period:

Data on on-chain stock trading volume will provide an empirical basis for future permanent rules. The performance of AMM liquidity pools in securities trading (slippage, price discovery efficiency, manipulation risk) will be truly tested. How issuer objection rights operate in practice (how many companies will proactively block their stocks from being tokenized?) will also provide policy reference.

If the experiment succeeds, after five years the SEC may convert the exemption into permanent rules, and tokenized stock trading will become a permanent component of U.S. capital markets. If the experiment fails, or the political environment changes, TSVs will have to shut down or transform when the exemption expires.