The SEC is hitting pause on a planned 'innovation exemption' that would have let digital tokens representing shares of companies like Apple, Nvidia, and Tesla trade on decentralized crypto platforms around the clock. The delay, confirmed by people familiar with the talks, came after stock-exchange officials and market participants met with SEC staff in recent days and raised alarms about investor protections and market fragmentation.
What the exemption would have done
Under SEC Chair Paul Atkins' 'Project Crypto' initiative, the agency was leaning toward permitting third-party tokens — digital representations of publicly traded stocks — to be issued and traded without the underlying company's consent. These tokens likely wouldn't carry traditional shareholder rights like voting or dividends, though the SEC was considering requiring platforms to offer those rights or risk delisting. The idea was to create a parallel, crypto-native market running alongside the existing system.
Why exchanges pushed back
The World Federation of Exchanges, whose members include Nasdaq, Cboe, and CME Group, warned in a November 2025 letter that such exemptions could 'dilute' existing investor protections and 'distort' competition. The federation cautioned that granting legitimacy to tokenized stocks before full compliance implementation would have 'negative — potentially acute — consequences' for U.S. markets. That message clearly stuck with SEC staff as they weighed the proposal.
Nasdaq's already-approved path
Notably, Nasdaq received SEC approval in March 2026 for its own tokenized securities proposal. That keeps all trades on-exchange with full shareholder rights, built on the DTCC's enterprise blockchain. The contrast is stark: one approach keeps everything within the regulated exchange framework, while the exemption would have let dozens of third-party issuers fragment liquidity for the same underlying stock across crypto platforms.
What comes next
The delay isn't a kill shot — the SEC hasn't shelved the exemption entirely. Officials are now reviewing the feedback from exchanges and market participants. A revised version could still surface, but the timing isn't great for a pro-crypto administration that wanted a fast win. The unresolved question is whether the SEC can craft a rule that satisfies both the crypto industry's appetite for 24/7 trading and the traditional exchanges' demand for uniform investor protections.
