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Regulators step in after failed Senate vote

The CLARITY Act failed to make the expected progress in the U.S. Senate on Sept. 15. The outcome delayed a comprehensive legal framework for digital assets as well as tokenized money, shares, bonds and similar instruments. But just two days after the congressional setback, the U.S. Securities and Exchange Commission (SEC) issued a limited-scope “Innovation Exemption,” clearing the way for tokenized U.S.-listed shares to be traded on blockchain at some platforms.

According to the source, the move offered the market some short-term relief while raising a bigger long-term question: how long can permission from regulators stand in for a permanent law passed by Congress? For banks, exchanges and asset managers in particular, legal durability is seen as more important than day-to-day approvals when billions of dollars are being invested in infrastructure.

What does the SEC's five-year exemption allow?

Narrow scope for tokenized shares, limited testing period

The SEC’s five-year exemption allows certain eligible platforms to begin trading tokenized, U.S.-listed shares on-chain through automated market makers and liquidity pools. Under this model, platforms that meet specific conditions do not have to register as exchanges, and some liquidity providers are also exempt from broker-dealer registration requirements for the covered activities.

  • Trading is limited to verified participants only.
  • Volume for each share is capped at a small fraction of normal market volume, and margin trading is not allowed.
  • The SEC retains the authority to later change the terms and duration of the exemption.

The Commodity Futures Trading Commission (CFTC) also moved at the same time to reduce certain barriers for software providers and updated its guidance on tokenized investments and blockchain-based recordkeeping.

What does an investor actually own in a tokenized share?

If rights do not match the underlying stock, the product may fall outside the scope

According to the assessment cited in the report, not every “tokenized share” product gives investors direct shareholder rights. Some products offer only synthetic exposure to a stock’s return, while tokens covered by the new SEC exemption must carry the same dividend rights, voting rights and liquidation claims as the underlying share.

If a third-party company tokenizes a share without approval, it must notify the company in question 30 days in advance, and the company has the right to block trading on that platform. In that respect, the regulation seeks to draw a clear line between synthetic products and true ownership.

The report stresses that before making any allocation decisions, investment advisers should test fees, price impact, the resilience of the liquidity pool in periods of stress, custody structure and the exit process if the platform shuts down. Even without a broad law from Congress, the U.S. appears to be entering a limited but concrete pilot phase for tokenized capital markets.

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