SEC provides updated guidance on tokenized stocks, increasing oversight of synthetic equity

SEC Issues New Guidelines on Tokenized Stocks

The U.S. Securities and Exchange Commission (SEC) has taken a firm stance against the rising trend of "tokenized stocks"—digital assets that mimic the behavior and appearance of traditional equities but do not grant actual ownership rights. The agency has released updated guidance clarifying that synthetic equity products created by third parties are subject to established securities and derivatives regulations.

According to a joint statement from the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets, tokenized securities fall into two main categories: those directly issued or authorized by the underlying company, and those generated by outside parties without the issuer’s participation.

The SEC cautioned that the latter group typically provides only synthetic exposure rather than genuine equity ownership. This distinction has become especially important after OpenAI recently distanced itself from tokenized "equity" tied to its shares, which were being offered on Robinhood’s European platform without the company’s approval.

The SEC emphasized that the process of tokenization does not change the applicability of federal securities laws. Regardless of whether securities are tracked on a blockchain or managed through traditional systems, issuers maintain authority over ownership records, transfer permissions, and shareholder privileges.

Only tokenized securities that are officially integrated into a company’s shareholder registry—meaning they are issued or endorsed by the company itself—can be considered true representations of equity ownership, according to the SEC.

Types of Third-Party Tokenized Stocks

• Custodial Arrangements: Some tokenized stocks are backed by shares held by an intermediary, giving investors a claim on those shares but also exposing them to risks associated with the intermediary, such as insolvency or default.
• Synthetic Instruments: Other products, like linked securities or security-based swaps, simply mirror the price movements of a stock without offering any voting rights, access to company information, or direct claims on the issuer.

By clarifying these classifications, regulators aim to restrict the availability of synthetic equity products to everyday investors and encourage the development of compliant, issuer-backed tokenized securities that operate within the established regulatory framework.