The Securities and Exchange Commission has reaffirmed that tokenized stocks remain securities subject to traditional regulations, despite their blockchain-based nature. This stance means tokenized equities must comply with the same registration, disclosure and anti-fraud regime as conventional securities, even as firms experiment with blockchain for settlement, fractionalization and new trading workflows.

Our Division of Trading and Markets issued a staff statement on the custody of crypto asset securities by broker-dealers. https://t.co/5u3mrAGmmu

— U.S. Securities and Exchange Commission (@SECGov) December 17, 2025

Regulatory perimeter: tokenization changes form, not legal status

Regulators are applying long-established securities laws to on-chain equity representations, using the Howey test to determine whether tokens constitute investment contracts. The Securities Act of 1933 and the Securities Exchange Act of 1934 remain the core regulatory backbone for tokenized securities, and token issuers and intermediaries must either satisfy registration obligations or fit within clearly defined exemptions. Non-compliance exposes projects and platforms to enforcement actions, including sanctions and potential rescission demands. The SEC’s consistent message is that tokenization is a technological representation layer, not a mechanism to reclassify the underlying asset’s legal status.

Custody rules sit at the center of the SEC’s oversight strategy for tokenized stocks. Existing guidance extends the concept of “physical possession or control” to crypto assets by tying legal custody to exclusive control of the relevant private keys. This interpretation creates operational friction for decentralized and self-custody models, because regulated broker-dealers must be able to demonstrate they control the cryptographic credentials required to move the assets. Industry analysts note that this approach deliberately prioritizes investor protection and intermediary accountability over fully permissionless custody architectures.

The SEC has allowed limited experimentation via conditional exemptions and regulatory sandboxes, including approvals for pilot tokenization projects at established market utilities. These pilots are tightly scoped, with investor limits, transaction caps, reporting obligations and time-bound approvals designed to collect data while constraining systemic risk. Major industry organizations are pushing for “parity” between tokenized and traditional shares, arguing that tokenized stocks must deliver identical investor protections and should not become a vehicle for regulatory arbitrage, liquidity fragmentation, market manipulation or persistent price divergence versus the underlying securities.

Market operators, custodians and trading firms are expected to embed compliance into token design and operational workflows from the outset. Custody architecture, broker-dealer relationships and surveillance capabilities collectively determine whether a tokenized offering satisfies regulatory expectations on disclosure, control and market integrity. Previous enforcement actions against platforms that listed tokenized equities without appropriate registrations or licenses underline the legal and reputational risks of moving ahead without regulatory alignment.

The next critical milestone will be the outcomes and conditions attached to market-utility pilots and any formal SEC decisions on conditional exemptions. These developments will crystallize practical custody requirements and define the permissible operating envelope for tokenized-stock trading in regulated environments. While tokenized stocks promise benefits such as fractional ownership and faster settlement cycles, those advantages will only be realized at scale if they are delivered within the existing securities-law and custody framework rather than positioned as a workaround to it.