The Securities and Exchange Commission opened a new route Thursday for tokenized stock trading, just two days after the Senate blocked the CLARITY Act and stalled Congress’s sweeping effort to rewrite federal rules for cryptocurrency markets.
The SEC’s five-year “Innovation Exemption” allows qualifying platforms to facilitate trading in tokenized versions of publicly traded stocks without registering as national securities exchanges. Certain liquidity providers can also receive temporary relief from dealer registration.
SEC Chairman Paul Atkins directly linked the move to Congress. Atkins said the agency was acting within its existing statutory authority after lawmakers failed earlier this week to advance the Digital Asset Market CLARITY Act.
The House passed H.R. 3633 by a 294-134 vote in July 2025, sending the CLARITY Act to the Senate. On Tuesday, the Senate rejected cloture on a motion to proceed to the bill in a 49-50 vote. Sixty votes were required, stopping the chamber from taking up the House-passed legislation.
The CLARITY Act would establish a federal market structure for digital assets and define how regulatory authority is divided between the SEC and the Commodity Futures Trading Commission. The legislation would set rules for determining when a digital asset falls under securities regulation and when it is treated as a digital commodity.
The SEC order reaches a narrower part of the digital asset market. Its exemption uses authority already granted to the agency under the Securities Exchange Act and applies specifically to certain tokenized securities.
Tokenized stocks use blockchain technology to represent shares in publicly traded companies. Under the exemption, eligible tokens must carry the same rights as the traditional shares they represent, including voting and dividend rights. Synthetic products that merely track a stock’s price are excluded.
Trading venues will face limits on the number of stocks and trading volume. Smart contracts must be auditable and deployed on a public blockchain, while trading must stop when the underlying stock is halted. Companies will also receive notice and an opportunity to object before an unaffiliated third party makes a tokenized version of their shares available.
The exemption is scheduled to expire five years after publication as the SEC considers longer-term rules. Federal anti-fraud and anti-manipulation laws continue to apply to securities activity conducted through the new system.
Tuesday’s Senate vote followed a final push by Republican negotiators to secure enough support for the CLARITY Act. Sens. Cynthia Lummis, John Boozman and Tim Scott said the latest draft incorporated 126 substantive changes requested by Democrats. The revisions included new ethics provisions, a larger enforcement role for state attorneys general, and Treasury authority aimed at concerns over deposit flight tied to payment stablecoins.
Four Republican senators joined Democrats in opposing the procedural motion. Tillis entered a motion to reconsider the failed cloture vote, preserving a procedural route to another attempt to advance the CLARITY Act. The Senate has not scheduled another vote.
The failed vote leaves the House-passed CLARITY Act stalled in the Senate as lawmakers remain divided over a broader federal framework for cryptocurrency markets. The SEC’s Innovation Exemption, meanwhile, gives qualifying tokenized stocks a five-year route into blockchain-based trading under the agency’s existing securities authority.
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