- The Clash: Global exchanges (WFE) are lobbying the SEC to block “innovation exemptions” for crypto platforms.
- The Risk: WFE argues “tokenized stocks” are synthetic assets that lack voting rights and bankruptcy protection.
- The Policy: The move challenges SEC Chair Paul Atkins’ plan to deregulate crypto to spur US innovation.
The World Federation of Exchanges (WFE) urged the US Securities and Exchange Commission (SEC) to rethink its plan to grant regulatory exemptions for tokenized stock offerings. The entity warned that the move could expose investors to major risks.
In a detailed letter submitted on November 21, the group, whose members include Nasdaq and Cboe, challenged the idea of an “innovation exemption” that would allow unregistered crypto firms to issue digital versions of US equities.
The WFE said this approach could open the door for platforms to sell stock-like tokens without meeting the protections built into traditional exchanges.
Related: SEC Prioritizes Clearing Shutdown Backlog as Issuers Eye Faster ETF Approvals
Risks Tied to Tokenized Offerings
According to the federation, the rise of brokers and crypto platforms offering “tokenized US stocks” is being marketed as a faster, always-open alternative to regular equity trading.
But the group said that these mimicked assets are not real shares and fail to provide the same rights, protections, or regulatory controls. The WFE claims that this gap introduces serious risks around asset custody, settlement, transparency, governance, and investor protection.
The debate comes as the SEC weighs requests from crypto companies that want exemptions to launch tokenized equities in the United States. SEC Commissioner Paul Atkins, a former crypto lobbyist, has backed the idea of an innovation exemption to accelerate blockchain product development.
He argued earlier this year that such an exemption could help advance President Trump’s stated goal of making the US the global hub for crypto innovation.
WFE Pushes Back on Atkins’ Statement
The WFE pushed back on Atkins’ views, adding that while it supports responsible innovation, exemptions must be narrow and targeted. The group warned that granting relief could distort competition, weaken disclosure rules, and allow firms to bypass registration requirements simply because they find regulation inconvenient.
The body suggested that relief should be time-limited, conditional, and accompanied by strict oversight, including AML controls, asset segregation, transparent governance, and ongoing SEC supervision.
The group also recommended a sandbox model where tokenization experiments can take place under tighter regulatory boundaries. Moreover, the letter referred to an earlier WFE warning issued in August, where the group told US and European regulators that third-party tokenization of equities by unregulated brokers posed serious governance and compliance risks.
Related: Fuse Crypto Receives SEC No-Action Letter for Solana-Based ENERGY Token
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