SEC Weighs Giving Companies Right to Challenge Third-Party Stock Token Listings

The U.S. Securities and Exchange Commission is weighing a plan that would let companies object to the listing of tokenized shares issued by third parties without the companies' consent.

Bloomberg reported on Aug. 11 that the provision may be included in the SEC's forthcoming "Innovation Exemption" framework for trading tokenized securities. The proposal could be released as soon as Aug. 14.

The Innovation Exemption would waive some regulations to allow traditional securities such as stocks to trade as tokens on blockchain networks. If adopted, it would allow 24-hour trading of tokenized equities in the U.S. and could significantly alter the structure of the stock market.

The SEC had originally planned to unveil the proposal in May. It postponed the release to review additional feedback from market participants, including stock exchanges and listed companies.

At the center of the debate was whether third parties should be allowed to tokenize and trade shares of a specific company without that company's approval or involvement. The SEC is now considering including an option in the final proposal that would give companies the right to object to third-party listings of tokenized versions of their own shares.

"We have strongly argued that corporate issuers should remain involved in how their shares are tokenized," Securitize CEO Brett Redfearn said. He added that he hopes the SEC has given companies a meaningful opportunity to participate.

The SEC is also set to strengthen safeguards aimed at preventing tokenized stocks issued overseas from being exploited through regulatory gaps. Bloomberg reported that the agency is considering limiting tokenized securities trading platforms to U.S. entities and adding anti-money laundering, or AML, requirements.

Separately, the SEC plans to hold a public meeting on Aug. 14 to discuss whether to propose new rules for a securities issuance framework tailored to certain investment contracts tied to virtual assets, or cryptocurrencies.

The SEC's regulatory push comes as Congress has yet to advance the CLARITY Act, legislation designed to establish a market-structure framework for digital assets. Senate Majority Leader John Thune has taken steps toward a procedural vote on the bill in mid-September, after lawmakers return from the August recess.