Nasdaq Wins SEC Approval to Trade Tokenized Securities in Pilot Program

In brief The plan covers Russell 1000 stocks and some index ETFs at launch, with the same rights, symbols, and priority. Tokenized trades would still flow through DTC and revert to traditional settlement if needed. During the review, commenters questioned its mechanics, market risks, and how much say issuers should have. Nasdaq’s proposal to trade some stocks in tokenized form received formal approval from the U.S. Securities and Exchange Commission on Wednesday, though the structure would still keep trading and settlement within traditional market rails. Covering some securities already listed on the national securities exchange, the changes would begin with Russell 1000 stocks and certain index ETFs, with tokenized shares required to match their traditional counterparts in terms of rights, symbols, and trading priority. Tokenization is the process of turning a traditional asset, such as a stock or ETF, into a digital asset on a blockchain, tied to the original security that carries the same rights.  Participating brokers can mark an order for tokenized settlement when they enter it, and Nasdaq would pass that instruction to the Depository Trust Company after the trade is executed, the SEC said. If DTC cannot carry out the request because the broker or security is not eligible, or because the blockchain or wallet is not compatible, the trade will settle in traditional, non-tokenized form. Decrypt has reached out to Nasdaq for comment on when tokenized trading could begin and what still needs to be in place before launch. Same rails, new wrapper Nasdaq filed its proposal in September last year, comparing tokenization to earlier market innovations like decimalization and electronification. At the time, the exchange argued that existing regulatory structures "mandated by Congress" already apply to tokenized securities regardless of their blockchain properties. The SEC acknowledged in its approval letter that during the review process, several commenters raised questions about how Nasdaq’s tokenization model would work. SIFMA, the main trade group for the U.S. securities industry, and Cboe Global Markets, one of the largest U.S. exchange operators, focused on the lack of clarity around DTC’s role. The Digital Chamber, a blockchain policy and advocacy group, argued the SEC should avoid favoring specific firms or technologies and give issuers more say. Better Markets, a nonprofit focused on financial reform, opposed the proposal due to potential price gaps, surveillance concerns, and legal uncertainty. By late November, major exchanges and market groups urged the SEC to avoid broad exemptions on tokenized securities, warning that looser relief could create uneven rules and new risks around tokenized stocks. The SEC’s nod for Nasdaq comes as regulators and exchanges take a more structured and coordinated approach to tokenization, though the limits set for Nasdaq suggest that, at least for now, these can only be done through the existing system rather than a separate on-chain venue. Earlier this year, SEC staff said that tokenized assets are securities first, technology second, affirming its position that placing a security on a blockchain does not alter its legal classification under federal law. Opening the door The approval matters because “it starts to make listed equities more programmable, not just more digital,” Steven Wu, chief operating officer at tokenization engine Clearpool, told Decrypt . “The SEC is opening the door for these assets to move beyond trading and into broader financial use cases,” Wu said. The changes introduce “flexibility at the infrastructure layer without disrupting how markets function today,” he noted, pointing to a longer-term shift toward faster settlement and eventually markets that can operate closer to real time. “Tokenized equities point toward a model where price discovery is no longer constrained by traditional market hours,” he said. For institutional players, the SEC’s approval “creates more flexibility at the asset level, Samar Sen, head of international markets at institutional digital asset firm Talos, told Decrypt . “Institutions will be looking closely at how tokenized securities plug into post-trade infrastructure, especially where settlement still runs through central clearing and settlement systems, and whether liquidity develops consistently across both formats,” he added. Daily Debrief Newsletter Start every day with the top news stories right now, plus original features, a podcast, videos and more. Your Email Get it! Get it!