Global Exchanges Urge SEC to Curb Broad Crypto Exemptions and Warn of Tokenized Stock Risks

A federation of stock exchanges has sent a letter to the US Securities and Exchange Commission, urging the regulator to lift special exemptions given to crypto companies that offer tokenized shares.

In one letter sent to the SEC last week Crypto Task ForceThe World Federation of Exchanges, of which Nasdaq, Cboe and CME Group are members, told the agency that exemptions should not be used to fast-track crypto trading platforms into roles similar to national stock exchanges without requiring full compliance.

The federation stated that it is “alarmed” about “the plethora of brokers and crypto trading platforms offering or planning to offer so-called tokenized US equities,” citing a position paper it was published at the end of August this year.

Such products are “marketed as equity tokens or the equivalent of shares, when this is not the case,” said the letter signed by CEO Nandini Sukumar.

“While we support the principle of exempt exemptions, we are concerned that the broad use of such exemptions poses risks to investors and market integrity,” the letter continued.

Exempt exemption is a regulatory mechanism that allows a company or platform to avoid specific regulatory requirements when the SEC determines that doing so is in the public interest and will not harm investor protection. It can be granted temporarily or permanently.

The WFE said it supports the SEC’s right to use waivers, but argued that they are only appropriate when “a waiver is reasonably necessary for a company to provide a product or service on a level playing field” and also if it is “found to be consistent with the interests of the public and investor protection.”

The federation’s position comes at a time when the SEC is making a decision potential sandbox framework that could grant time-limited exemptions to crypto platforms offering tokenized shares, as part of a broader effort to explore how digital asset markets might function under changed regulatory conditions.

In October, SEC Chairman Paul Atkins spoke said the agency had been exploring formal “innovation exemptions” that could provide crypto companies with temporary relief from existing rules.

The framework, expected to arrive within a year, it would allow platforms to test products like tokenized stocks under SEC oversight while regulators assess long-term policy needs.

Previous attempts to launch tokenized stock products in the US have attracted attention, including Robinhood’s controversial taking steps to offer blockchain-based equities through a European-based partner.

Declutter has contacted the SEC and the World Federation of Exchanges for comment.