Winners and losers of the SEC’s new tokenized stocks rules

The SEC has opened a five-year path for tokenized stocks, but only some products and venues fit the model. Will Uniswap, Robinhood, Coinbase or Kraken come out on top?

“Tokenization is coming to America,” said Robinhood chief executive Vlad Tenev after the SEC announced its Innovation Exemption last week — and it seems the markets looked kindly on the development.

BTC and ETH soared over 10%, and Uniswap’s UNI token — a protocol that looks as it if could become prime real estate for tokenized stock trading — gained more than 30% in the days that followed.

While the Securities and Exchange Commission has indeed greenlit tokenized stocks in America, most of the existing stock tokens fall outside of the new rules.

The commission’s new five-year Innovation Exemption creates a path for certain venues to trade tokenized National Market System (NMS) stocks onchain without registering as a securities exchange, and for third parties to tokenize stocks — but only under a specific set of conditions.

Tokens must give holders the same “rights and privileges” as the underlying shares and trading venues need to permission users and pools.

Related: Kraken brings DeFi yield to tokenized stocks and ETFs

Not all tokenized stocks are created equal. A token can look like a share and track the price of a share without providing the shareholder rights of a share. Under the new rules that’s classified as a synthetic stock and it’s not compliant.

UNI gained over 30% after the SEC announcement. Source: Coingecko

That means some of the industry’s biggest players may already have a head start, while others will have to play catch-up. As Ondo Finance’s head of global regulatory affairs, Peter Curley, tells Magazine:

The SEC’s Sept. 17 order gives certain venues temporary relief from having to register as exchanges when they trade tokenized NMS stocks through permissioned AMM liquidity pools.

In other words, the agency has opened a lane for onchain stock trading, but it’s a fairly specific one, and the token itself becomes just as important as the venue.