Stock Exchanges Warn SEC Against Exemptions for Tokenised Stock Sales by Crypto Firms

WFE Says SEC’s Proposed “Innovation Exemption” Could Harm Investors

A group of major global stock exchanges has warned that the U.S. Securities and Exchange Commission (SEC) risks undermining investor protection if it grants regulatory relief to crypto firms seeking to sell tokenized stocks in the United States.

Several crypto companies are planning to offer digital tokens linked to publicly listed equities, giving retail investors exposure to stocks without directly owning the underlying shares.
However, because these firms are not registered broker-dealers, they would need the SEC to issue either a no-action letter or a special exemption to operate legally.

SEC Chair Paul Atkins recently confirmed that the agency is exploring an “innovation exemption” that would allow crypto businesses to test new models under lighter regulations.

Global Exchanges Push Back on Crypto Exemptions

The World Federation of Exchanges (WFE) — whose members include major players such as Nasdaq and Deutsche Boerse — sent a letter to the SEC on November 21 warning that such exemptions could threaten market integrity and weaken long-standing investor protections.

“The SEC should avoid granting exemptions to firms attempting to bypass regulatory principles that have safeguarded markets for decades,” WFE CEO Nandini Sukumar told Reuters.
The SEC published the letter on its website but declined to comment.

WFE Raises Red Flags Over Tokenized Equity Products

The WFE, which already voiced concerns in August about platforms offering tokenized stocks, did not specify which crypto firms or regulations were involved.
Tokenising equities typically means creating blockchain-based tokens pegged to traditional stocks.

Under the Trump administration, the SEC has adopted a more flexible approach to crypto — a shift welcomed by the industry as it pushes deeper into mainstream finance. Banks and financial institutions are also exploring blockchain-based products.

Financial Sector Supports Innovation but Warns Against Uneven Rules

While the WFE describes itself as “pro-innovation”, the letter signals growing discomfort within the traditional finance sector as crypto companies begin to compete more directly with regulated exchanges.

“We and the crypto platforms should be competing on a level playing field, subject to the same rules,” said James Auliffe, head of the WFE’s technology working group.

Crypto firms argue that blockchain could improve stock trading efficiency. But Auliffe noted that traditional equity markets are already highly optimized: “What you can see from the fact that no one’s done it is that equity markets are already very, very efficient.”