The Securities and Exchange Commission is expected to release a framework this week that would let crypto exchanges trade blockchain-based versions of publicly listed stocks, according to people familiar with the matter cited by Bloomberg on May 18. The release, described internally as an "innovation exemption," has been months in the making — and its most consequential feature is one the companies being tokenized never asked for.
The SEC is leaning toward permitting third parties to issue tokens tracking publicly traded equities without the consent of the underlying companies, Bloomberg reported. That single provision turns what might otherwise be a routine market-modernization measure into something structurally harder to undo.
What the exemption does
The framework, developed under Chair Paul Atkins' "Project Crypto" initiative and grounded in Section 3(b) of the Securities Exchange Act of 1934, creates a sandbox for qualified crypto platforms to list tokenized equities under reduced compliance requirements. The trade-off: 24/7 trading windows and near-instant settlement, but tokens that strip out traditional shareholder rights such as voting and dividends.
The SEC consulted "hundreds of market participants" in shaping the rules, per the Bloomberg report. One protection being floated: third-party tokens that don't carry the same economic rights as common stock — voting rights, dividend access — would face delisting.
The exemption is framed as temporary relief, not permanent rule change, consistent with the agency's broader pattern under Atkins of using sandbox-style carve-outs rather than formal rulemaking to open new product categories.
The consent problem
In issuer-sponsored tokenization, the company behind the equity participates in or authorizes the creation of the token. That model exists already: Securitize, which received FINRA approval in May 2026 to custody tokenized securities and execute atomic on-chain settlement, works within that framework.
The third-party model is different. A crypto platform creates and lists a token that tracks Apple or Tesla without Apple or Tesla having any role in or notice of the process. The issuer has no agreement with the token platform, no visibility into how the token is priced, and no channel to push material disclosures directly to token holders.
Brett Redfearn, president of Securitize and a former director of the SEC's Division of Trading and Markets, said publicly that enabling third parties to tokenize stock "without an issuer at the table" creates fragmentation risk. Redfearn's objection is notable: Securitize's business depends on tokenized securities succeeding, so his concern is not reflexive hostility to the concept but a dispute about which path gets there without structural damage.
Wall Street's formal objection
Traditional exchanges have been raising alarms since before the exemption was formally announced. Nasdaq and CME Group sent a joint letter to the SEC in December 2025 urging rejection of the proposed carve-outs, warning that allowing crypto firms to trade tokenized equities outside the full securities oversight framework would harm investors and distort markets.
Their core argument: a parallel venue for the same underlying asset, operating under different disclosure and reporting requirements, fragments the price discovery process. When two markets trade the same stock under different rules, arbitrage becomes costlier to execute, spreads widen, and retail investors on the lighter-regulated side bear the risk of stale or manipulated pricing.
The objection extends to the regulatory arbitrage problem. If a crypto exchange can list a tokenized Tesla share under the innovation exemption while Nasdaq must comply with full Exchange Act requirements, the competitive asymmetry isn't a transition phase — it's a permanent structure that advantages the less-regulated venue.
Peirce's role
Commissioner Hester Peirce led the internal push for the innovation exemption, according to Bloomberg's sources. Peirce, known for years as "Crypto Mom" for her long dissent from the Gensler-era enforcement posture, has been the SEC's most visible advocate for permissive frameworks for digital assets. Her influence in the Atkins commission reflects a broader institutional shift: the agency's deregulatory posture on crypto is now being translated into specific product-level relief, not just enforcement withdrawal.
Who benefits
Crypto-native exchanges are the most immediate beneficiaries. Hyperliquid, a decentralized perpetuals and spot exchange, has been named specifically in Wall Street objection letters as a type of platform the exemption would advantage — one that could list tokenized versions of public equities without registering as a national securities exchange or broker-dealer in the traditional sense.
The broader beneficiary class is any platform that can meet the innovation exemption's decentralization and on-chain safeguard thresholds while serving retail users who want equity exposure outside brokerage accounts, potentially at any hour and in fractional sizes currently unavailable on traditional venues.
Where this fits
The innovation exemption lands at the end of a consistent line from the current administration. Atkins, confirmed as SEC chair in early 2025, has used interpretive guidance, no-action relief, and sandbox exemptions to move the agency away from the enforcement-first approach of the Gensler years. The tokenized stock framework is the most direct application yet of that posture to traditional equity markets — not a niche crypto product category, but the core of American public company finance.
The SEC has not formally released the framework as of this writing. Bloomberg's May 18 report pegged the release as imminent. When the text is out, the structural details — exactly who qualifies, how the consent question is handled at the token-issuer interface, and whether voting and dividend rights are required or just encouraged — will determine whether the Wall Street critique holds.
The legal architecture is set up to move fast. Whether the market structure can absorb a parallel, lightly regulated equity venue without the problems traditional exchanges are warning about is a question the exemption, by design, intends to test.