On September 17, 2026, the US Securities and Exchange Commission (SEC) issued its Innovation Exemption order (the Order), which grants a five-year, conditional exemption intended to permit trading of certain tokenized national market system (NMS) stocks on new Tokenized Securities Venues (TSVs). The Order is significant for public companies because it permits a third party to tokenize a public company’s stock that is listed on a national securities exchange and facilitate trading onchain without the issuer initiating or sponsoring the tokenization—subject to an important issuer right to notice and to object.
The SEC requires that TSVs provide public notice of their operations and trading activities related to the tokenized venue. In conjunction with the public notice, the SEC also requires TSVs to send written notice to the public company issuers of the NMS stocks. Upon receipt of such notice, public companies have a 30-day window to object to having unaffiliated third-party tokenized shares listed for trading on that TSV, should they choose to do so.
On October 4, 2026, one of the first TSVs issued the required public notice about its intent to launch and included a list of the tokenized NMS stocks that it intends to make available for trading. The publicly traded companies identified therein include large cap companies across a variety of industries, such as technology, retail, and financial services.
As we discussed in our recent LawFlash, public companies should establish procedures now to identify TSV notices and determine whether to permit or object to third-party tokenization. The 30-day window to object begins when the notice is received by the issuer, whether by physical mail or email, at the address for the company’s principal executive offices as listed on the cover page of its Exchange Act reports. Mailroom teams, investor relations, corporate secretary personnel, and others who handle incoming correspondence should understand that receipt may start a critical 30-day decision period and have established procedures in place for alerting the legal department.
In addition, public companies should ensure that their internal teams and the board of directors have been properly informed and educated about tokenized securities and the various means by which tokenized securities are created and traded onchain. In this respect, while TSVs have the benefit of the conditional relief granted by the Order, there are other methods, including issuer-sponsored tokenized securities, and trading venues across the globe.
FOR ISSUERS THAT HAVE TOKENIZED THEIR OWN STOCK
The Order permits a TSV to trade NMS stock tokenized by or on behalf of the issuer, with no prior engagement with the issuer.
Issuers that have tokenized their own shares do not have a right to advance notice from the TSV or a right to object to having those issuer-tokenized shares traded on that TSV; however, the issuers would retain the right to object to having unaffiliated third-party tokenized securities traded on the TSV.
For these companies, the principal task is therefore operational readiness and consistency between the tokenized and traditional ownership systems.
Legal teams should work with the transfer agent, corporate secretary, and proxy/solicitation providers to confirm that transfers, record ownership, dividends, voting rights, corporate actions, and shareholder communications can be administered correctly across shares traded on both traditional and tokenized trading venues.
FOR ISSUERS THAT HAVE NOT TOKENIZED THEIR STOCK
The Order permits a TSV to trade NMS stock tokenized by a third party that is unaffiliated with the issuer, subject to the TSV providing the issuer with advance notice and a 30-day window for the issuer to object.
The TSV must deliver written notice (an Issuer Notice) to the email address or physical address for the issuer’s principal executive offices shown on the cover page of its Exchange Act reports. Trading cannot begin until at least 30 calendar days after the issuer receives the notice.
The issuer may prevent the third-party tokenized stock from trading on the TSV by delivering a written objection (a Notice of Issuer Objection) on or before the 30th calendar day after receipt. If a timely objection is made, the TSV cannot make the security available for trading under the exemption and must post the issuer’s objection on its website within five days.
Because there is no publicly available central repository or reporting mechanism for issuers that have elected to object to having third-party tokenized shares traded on a TSV, it is possible that issuers may receive notices from (and need to submit corresponding objections to) multiple TSVs.
WHAT FACTORS SHOULD ISSUERS CONSIDER?
There are both risks and benefits associated with a public company having its shares tokenized and traded on a TSV. Some of the many factors that issuers should evaluate, include the following:
- The potential for increased visibility of its investor base, including retail investors
- Additional methods for investor engagement and communications
- Shareholder access to 24/7 trading and settlement in the company’s shares
- Automated tracking and enforcement of transfer restrictions via smart contract rules
- Shareholder register risks arising from onchain transfers and their interaction with the issuer’s official shareholder records
- Potential price dislocations or adverse effects on the underlying stock, including differences between prices generated through automated market makers and traditional markets
- Primary issuances of securities are not permitted on TSVs so issuers are not permitted to issue new or treasury shares on TSVs
- The Order does not provide an exemption from registration under the Securities Act of 1933, as amended, so distributions and transactions on TSVs must either be registered or exempt
In applying these considerations, issuers may also want to evaluate the below:
- Whether token holders will reliably receive dividends, voting rights, and other shareholder rights
- How record dates, corporate actions, and beneficial ownership will be handled
- How proxy materials and other shareholder communications will reach token holders
- How voting instructions will be transmitted and reconciled
- How to respond to investor inquiries, including whether the issuer sponsors or endorses the tokenization
- Cybersecurity, custody, smart-contract, operational, and reputational risks
REQUIREMENTS FOR TOKENIZED NMS STOCK
Under the exemption, the tokenized shares must represent the same interest in the issuer as the equivalent traditional shares. Holders must receive the same dividends, voting rights, and liquidation rights.
Synthetic instruments that merely provide economic exposure to an issuer’s stock are not treated as Tokenized NMS Stock under these provisions.
For third-party tokenization, the TSV also must ensure that the third party distributes or otherwise makes available proxy materials and other issuer communications to token holders, without cost to the issuer or its shareholders.
ACTIONS FOR PUBLIC COMPANIES
- Create a notice protocol: Ensure email and physical mail correspondence received at the principal executive offices is promptly reviewed for notices from TSVs, and immediately escalate any notice to the legal department and the corporate secretary.
- Calendar the 30-day deadline: A company that wants to prevent the trading of its securities tokenized by an unaffiliated third-party must act within the 30-calendar day objection period.
- Establish an internal review process: Determine who will be responsible for evaluating a notice and who has the authority to submit formal objection.
- Engage the transfer agent and proxy providers: Understand how tokenized positions could affect shareholder records, record dates, proxy distribution, voting, and corporate actions.
- Prepare a tokenization checklist: Focus on receipt and handling of notices and objections, ownership records, holder rights, proxy mechanics, custody, cybersecurity, smart contracts, trading mechanics, and potential price dislocations.
- Draft shareholder communications: Engage investor relations to develop a playbook for shareholder questions and public statements.
- For issuers that have already tokenized their shares, review the infrastructure: Confirm that onchain and offchain ownership records, transfer agent systems, and proxy processes remain synchronized.
- Monitor developments: The exemption currently runs through September 17, 2031, and the SEC may modify the framework based on experience and public comment.
HOW WE CAN HELP
Lawyers from our digital assets practice advise on the legal implications and practical implementation of tokenized real-world assets, including tokenized securities. We are available to discuss how your company should be preparing for tokenized securities and the implications and issues associated with having a company’s shares tokenized and traded.
