SEC and CFTC Issue Crypto Exemptions for Tokenized Stocks and Software Providers

Two Regulators Issue Crypto Exemptions Within Hours

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) each issued crypto-related exemptions on Thursday. The SEC granted a five-year conditional exemption that allows tokenized stocks to trade on permissioned automated market makers (AMMs) — blockchain-based trading systems that use algorithms to match buyers and sellers. The CFTC issued a no-action position that says passive software providers do not need to register as introducing brokers.

The actions came two days after the Senate blocked the CLARITY Act, a bill that would have set new rules for crypto markets, and a day after the two agency chairmen said they would write rules using their existing powers.

Key Details

• The SEC exemption applies to tokenized National Market System (NMS) stocks — shares of companies already listed on major U.S. exchanges — and covers trading through permissioned liquidity pools on public blockchains.
• The order places caps on trading: a venue may list up to 75 Tier 1 symbols (S&P 500 and Russell 1000 stocks and certain exchange-traded products) and trade up to 0.25% of the prior month's average daily volume per symbol. Tier 2 allows 250 symbols and 2.5% of average daily volume. Exceeding a cap triggers a three-month pause.
• Venues must use publicly auditable smart contracts (self-executing code on a blockchain), halt trading when the primary exchange halts the underlying stock, and publish dollar-denominated transaction data within 10 minutes.
• Issuers have a veto: a venue cannot list a third-party tokenized stock if the issuer files a written objection within 30 days of receiving notice.
• The CFTC letter applies to software providers that let users submit orders directly to registered brokers or exchanges, without the provider taking part in individual trades. It sets out ten conditions, including disclosure of relationships, compliance policies, and consent to Commission investigation.

What the SEC Says

SEC Chairman Paul Atkins called the order "a significant step forward" within the agency's authority, and said it "must be followed by durable rulemaking." Jamie Selway, director of the SEC's Division of Trading and Markets, called it "an important milestone."

Commissioner Hester Peirce said the order is not about decentralized finance, noting that truly decentralized systems do not need an exemption. Commissioner Mark Uyeda said the relief lets the agency observe the venues before writing long-term rules.

CFTC Position

The CFTC letter, Staff Letter 26-25, extends a position first given to Phantom Technologies in March. Phantom co-founder and CEO Brandon Millman said the new letter opens the same path to other software providers, "a win for the whole industry."

Industry Reaction

Blockchain Association CEO Summer Mersinger welcomed the SEC order as "a critical step toward modernizing U.S. capital markets." Crypto Council for Innovation CEO Ji Hun Kim said the order keeps activity inside the U.S. regulatory perimeter and reflects a historical approach of targeted relief.

What Is Confirmed

The SEC issued Release No. 34-106402 on Thursday, providing temporary and conditional relief from the definitions of "exchange" and "dealer." The CFTC issued Staff Letter 26-25 the same day. The order expires five years after publication. The exemptions do not cover primary issuance, antifraud provisions, or OFAC sanctions compliance.

What Is Still Unclear

The long-term rules the regulators plan to write are not yet known. The SEC order and the CFTC letter are temporary, and the agencies may amend or withdraw them before the order expires.

Why It Matters

The exemptions create a path for tokenized stocks to trade onchain in the U.S. within a regulated framework, and they broaden relief for software providers in crypto derivatives. Industry groups say the actions keep activity inside the regulatory perimeter and could encourage innovation while comprehensive rules are developed.

What Happens Next

The SEC will accept comments on the order. Industry groups said they plan to file comments. The agencies may use the exemption period to observe how the venues operate before drafting permanent rules.

Sources

• The Defiant