Several major U.S. companies have expressed reservations about the Securities and Exchange Commission’s (SEC) recent initiative to enable trading of tokenized stocks, highlighting concerns about investor protection, market fragmentation, and regulatory clarity.
In a move aimed at modernizing equity markets, the SEC last month issued a temporary exemption allowing authorized trading venues and market makers to offer digital tokens that represent traditional shares of publicly listed companies. These tokens would convey the same shareholder rights as conventional stocks, including dividends and proxy voting. However, the framework requires trading platforms to notify the issuing companies 30 days in advance before launching tokenized stock trading, allowing issuers to object and block the offering if they choose.
Despite regulatory safeguards, several notable corporations, including Broadcom, Verizon Communications, UnitedHealth, Cerebras Systems, AppLovin, Applied Digital, Rocket Lab, CoreWeave, and Applied Optoelectronics, have formally opposed having their shares tokenized under the SEC’s framework. Applied Optoelectronics, for example, cited uncertainty about how tokenization could affect its stock's price, liquidity, and volatility, as well as potential confusion among investors regarding the company’s endorsement of the offering.
Nasdaq, which is developing its own tokenization platform, has also declared that it will not allow its own shares to be tokenized in this manner. The exchange cited concerns that tokenized trading venues could operate outside the National Market System, which ensures real-time best price displays, consolidated trade reporting, and transparency. Nasdaq warned that such parallel markets could result in fragmented liquidity and price discrepancies, undermining investor protections.
Market participants and industry players have voiced similar concerns. Citadel Securities highlighted the risk that a tokenized equity market could become a "shadow" market detached from existing regulatory oversight, potentially scattering trading across multiple platforms and complicating liquidity and price discovery.
On the other hand, proponents of tokenization see it as an important innovation to attract new investor demographics accustomed to cryptocurrency trading’s around-the-clock availability. A notable example is OKX-ICE, a joint venture between Intercontinental Exchange and crypto exchange OKX, which recently triggered the SEC’s notification period to start tokenized trading on its blockchain-based platform, X Layer. OKX-ICE announced plans to tokenize shares of prominent companies such as Nvidia, Apple, Microsoft, Amazon, and Tesla. Andrew Cuomo, co-chair of OKX-ICE and former governor of New York, acknowledged that some issuers will approach tokenization cautiously but described the effort as a significant milestone.
Legal experts note that the SEC’s current exemptions are meant as a temporary, experimental framework designed to gather data and inform future rulemaking. Rodrigo Seira, a partner at Cooley, said the agency is likely to revise the rules based on initial outcomes and feedback to improve regulatory clarity and resilience to legal challenges.
As the 30-day objection window closes for many companies, the SEC and trading venues are monitoring the mixed response with the aim of balancing innovation with market stability and investor protections in this evolving segment of U.S. equity markets.