The Securities and Exchange Commission on Thursday established a framework for tokenized U.S. stocks to trade onchain, granting temporary relief to venues using permissioned automated market makers and liquidity pools. The SEC approved an "Innovation Exemption" for qualifying Tokenized Securities Venues, allowing them to facilitate tokenized National Market System stocks for five years without being classified as exchanges.

SEC Chairman Paul Atkins called the action a "significant step forward," saying it brings U.S. capital markets "into the digital age." The exemption is conditional and temporary as the Commission considers additional regulatory changes.

TSVs operating under the exemption must meet specific requirements covering transparency, recordkeeping, technology safeguards and trading limits. Critically, the SEC requires advance issuer notice before listing tokenized stocks. If an issuer objects, the exemption does not apply—a condition that follows Robinhood's dispute with AMC Entertainment.

AMC CEO Adam Aron publicly objected to Robinhood offering tokenized AMC shares without the company's explicit approval. Robinhood CEO Vlad Tenev countered that public companies do not necessarily control third-party products referencing their shares. The SEC's issuer-approval requirement settles that tension.

The exemption directly threatens legacy brokers. Crypto-native platforms—Robinhood, Coinbase and Gemini—now have regulatory cover to compete with Charles Schwab and Morgan Stanley's E*Trade on equities trading. Coinbase, Robinhood, Gemini and Kraken already offer tokenized equities to offshore customers; this framework clears the way for U.S. deployment.

Market reaction was immediate. Coinbase stock rose nearly 4 percent in morning trading. Robinhood gained over 3 percent. Morgan Stanley edged 0.5 percent lower, and Charles Schwab slid around 1.4 percent.

Retail sentiment shifted on Stocktwits. Robinhood and Morgan Stanley rose to "neutral" from "bearish." Charles Schwab jumped to "bullish" from "neutral." Coinbase sentiment remained "bearish" over the past day.

The SEC will use data from this five-year exemption period to develop longer-term rules for onchain securities.