The US Securities and Exchange Commission (SEC) released a joint statement on January 28, 2026 clarifying the application of federal securities laws to tokenized securities. This statement, published through the SEC’s Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets, addresses both issuer-sponsored and third party-sponsored models and provides guidance to market participants on compliance with federal securities laws.
The SEC under Chairman Paul Atkins has been supportive of efforts by securities industry participants to utilize blockchain technology to modernize US capital markets. In his remarks at the Advisory Committee meeting on December 4, 2025, Chairman Atkins noted the different tokenization models with which market participants were experimenting and commented on the need for finding “compliant pathways that allow market participants to leverage the unique capabilities of this new technology.”
Below, we provide a summary of the SEC’s statement and discuss other recent developments in securities tokenization.
Defining tokenized securities
The statement defines tokenized securities as financial instruments that are classified as “securities” under federal law but are represented as crypto assets with ownership records maintained, in whole or in part, on or through one or more crypto networks. The SEC recognizes two primary models for tokenized securities:
- Issuer-sponsored tokenized securities: Securities issued directly by the issuer in tokenized format.
- Third party-sponsored tokenized securities: Securities tokenized by unaffiliated third parties, which may or may not confer rights in the underlying security.
Issuer-sponsored tokenized securities
In the issuer-sponsored model, the issuer integrates digital ledger technology (DLT) into its recordkeeping systems, allowing transfers of the crypto asset to correspond with updates to the master securityholder file. The SEC emphasizes that the format – onchain or offchain – does not alter the application of federal securities laws. For example, all offers and sales must comply with registration requirements regardless of format, unless an exemption applies. Tokenized securities may also be of a different class from those issued in traditional format, although, if they share substantially similar rights and privileges, they may be considered the same class under federal securities laws.
Alternatively, issuers (or their agents) may tokenize a security outside of the master securityholder file, intended to facilitate the transfer of the underlying security. Under this model, an issuer would issue the security offchain and issue a crypto asset to security holders as a digital representation of that security. The crypto asset itself would not convey any rights, obligations, or benefits of the security, and the crypto asset and its onchain database records would not be directly integrated into the master securityholder file for the security. Instead, the crypto asset could be used indirectly to effect transfers of the security on the master securityholder file. In this case, the transfer of the crypto asset, which is a securities transaction, would operate to notify issuers (or their agents) to record the transfer of ownership of the security on the master securityholder file. Regardless of the technical approach, regulatory obligations remain unchanged in treating transactions in these crypto assets as securities transactions.
Third party-sponsored tokenized securities
Third parties may tokenize securities through two models:
- Custodial tokenized securities: In this model, the third party holds the underlying security in custody and issues a crypto asset representing an entitlement to that security. Transfers of the crypto asset result in updates to the entitlement records, whether maintained onchain or offchain. Under this model, the format in which the entitlement is issued does not affect how federal securities laws are applied. The Depository Trust Company’s (DTC) tokenized securities program discussed below represents such a model.
- Synthetic tokenized securities: In the synthetic tokenized securities model, the third party issues a crypto asset that represents its own security that provides synthetic exposure to an underlying security of an unrelated issuer, such as a linked security or a security-based swap. The third party may not offer or sell the crypto asset representing the security-based swap to persons who are not “eligible contract participants” (ECPs), as defined by the Commodity Exchange Act, unless a registration statement under the Securities Act of 1933 is in effect for the crypto asset, and the transactions in the crypto asset are effected on a national securities exchange. The definition of an ECP is to ensure that the security-based swap is between two institutional or highly sophisticated parties. The crypto asset may not confer direct rights in the underlying security.
It remains to be seen whether the SEC will adopt rules that would allow for the treatment of tokenized securities as American Depositary Receipts (ADRs), whereby a depositary would issue tokenized depositary receipts representing the underlying securities of an issuer. Presumably with such a structure, similar to ADR depositaries, depositaries of tokenized depositary receipts would have to maintain the underlying shares in a segregated account that would back the tokenized depositary receipts.
The SEC statement also encouraged engagement and offered channels for interpretive advice and assistance for those navigating questions regarding the tokenization of securities.
Other recent developments in securities tokenization
DTC no-action letter
On December 11, 2025, the SEC issued a no-action letter to DTC providing assurance that the SEC staff would not recommend enforcement action against it for the development and launch of a pilot program for its securities tokenization services and to provide relief for non-compliance with certain securities regulations. According to DTC, the pilot would allow DTC participants and their customers “to explore DLT and its potential benefits for recording their DTC-held securities, in a controlled production environment, under conditions designed to allow adjustment and refinement, limit risk of loss and systemic disruption, and provide broader insights as to the technical and regulatory features necessary to allow Tokenized Entitlements at scale.”
Under the pilot program, upon a DTC participant’s instruction, DTC would debit eligible securities from the participant’s book-entry account and credit them to an account on DTC’s centralized ledger that reflects all tokenized securities entitlements held in registered wallets. DTC would then mint tokens to the participant’s registered wallet. Tokens may be transferred directly between registered wallets, with all movements tracked by DTC’s off-chain LedgerScan system, which would make a record of tokenized securities entitlements. The no-action letter is effective for the three years following the launch of the pilot program, which is expected to occur in the second half of 2026.
Nasdaq proposed rule
On January 20, 2026, The Nasdaq Stock Market LLC (Nasdaq) amended its proposed rule change, which was filed on September 8, 2025, to enable the trading of tokenized securities on its exchange and to clarify the process for trading tokenized securities under the DTC pilot securities tokenization program discussed above. The amended proposal would require eligible DTC participants to indicate when placing an order whether the securities will be in a token or traditional format and other relevant information to comply with the DTC pilot program and no-action letter. Nasdaq would then communicate the tokenization instruction to DTC, which would implement the participant’s tokenization preference. The SEC has published the amended proposed rule change for public comment.
Conclusion
The SEC’s statement provides timely clarity on a topic which has been the focus of many in the traditional finance (TradFi) industry. Companies and other securities industry participants considering tokenizing securities are encouraged to be mindful of the different tokenization models available and that federal securities laws still apply when structuring offerings and other transactions in tokenized securities. Businesses should review their tokenization models in light of this guidance and seek counsel, as needed, to ensure compliance with federal securities laws.
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