Stock Exchange Group Demands Tighter Oversight of Tokenized Stocks: Regulatory Clash Looms

Wall Street's old guard just drew a line in the sand—and they're aiming it squarely at crypto's encroachment on traditional markets.

Major exchange groups are pushing regulators to crack down on tokenized stock platforms, arguing current oversight fails to protect investors from potential manipulation and settlement risks. Because nothing says 'we're worried about investors' like established players trying to stifle innovation that threatens their fee structures.

The move targets platforms offering synthetic versions of Tesla, Apple, and other blue-chip stocks—often accessible 24/7 with fractional ownership. Traditional exchanges claim these products create regulatory arbitrage and undermine market integrity.

Yet critics argue this is less about investor protection and more about protecting turf. After all, when was the last time Wall Street fought this hard for retail traders' best interests?

Regulators now face mounting pressure to choose sides: protect the legacy system or embrace the disruptive potential of blockchain—all while trying not to look completely behind the curve. Again.

Regulators to Apply Securities Rules on Tokenized Stocks: WFE

Furthermore, the UK-based stock exchange association has urged the US SEC, ESMA, and the global securities watchdog IOSCO’s Fintech Task Force to apply securities rules to tokenised assets.

Regulators should also clarify legal frameworks for ownership and custody of these products and prevent them from being marketed as stock equivalents, it added.

WFE warned that such stock issuers could suffer “reputational damage” in case if the tokens fail. The group did not mention which brokers and trading platforms it was referring to.

In June, investment platform Robinhood launched tokenized US stocks and ETFs, following a strong revenue growth and profitability.

Other major players in the industry have also made similar leaps. Centralized exchanges such as Kraken are also offering tokenized U.S.-listed stock trading, while Coinbase intends to tokenize its own $COIN shares.

Tokenized Stocks Remain Securities – SEC

In July, Hester Peirce, a Republican commissioner on the SEC, often referred to as “crypto mom,” said that any new models for trading securities known as “tokenization” still meet the securities regulations.

“As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset,” she said at the time. “Tokenized securities are still securities.”

With the market for tokenized equities experiencing rapid expansion, there is a clear shift in how traditional assets are perceived and utilized within the digital economy.

CoinGecko revealed that the tokenized equities sector of Real World Assets (RWAs) had grown by nearly 300% – an increase of over $8.6 million since the start of 2024 alone.

“Despite this impressive growth and increasing institutional engagement, simply tokenizing an equity — in itself – offers little inherent value beyond a digital representation,” said Kevin Rusher, Co-founder of RAAC.