SEC clarifies rules for tokenized stocks, tightening scrutiny on synthetic equity

In a joint statement, the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets said tokenized securities fall into two clear categories: those issued or authorized by the underlying company, and those created by third parties without issuer involvement.

The latter category, the SEC warned, often amounts to synthetic exposure rather than real equity ownership, a distinction that became newly salient after OpenAI publicly disavowed tokenized “equity” linked to its shares offered through Robinhood in Europe.

Tokenization, the SEC said in its statement, does not alter the application of federal securities laws. Whether a security is recorded on a blockchain or in a traditional database, issuers retain control over ownership records, transfer approvals, and shareholder rights.

Only issuer-sponsored tokenized securities, where the company integrates blockchain records into its official shareholder register, can represent true equity ownership, the agency said.

By contrast, third-party tokenized stocks generally fall into one of two buckets. Some are custodial arrangements that represent an entitlement backed by shares held by an intermediary, exposing investors to counterparty and bankruptcy risk.

Others are synthetic instruments, such as linked securities or security-based swaps, that track the value of a stock without conveying voting rights, information rights, or any claim on the issuer itself.

By formalizing how tokenized stocks are classified, regulators appear intent on limiting the spread of synthetic equity products to retail investors while steering compliant tokenization toward issuer-approved, fully regulated structures.