Vlad Tenev's problem with the SEC's innovation exemption now has a date to it. The order runs through September 17, 2031, and the Commission can modify it. On the Q3 earnings call, Tenev said the uncertainty could keep investors from putting major assets into tokenized markets.
Davis Polk’s analysis shows that the rules leave very little room to work with. A trading platform can handle only 0.25% of a large-cap stock’s average daily trading volume, and it can offer no more than 75 stocks under the exemption. For a stock that trades around 3 million shares a day, that leaves a platform with roughly 7,560 shares to trade. That may be enough for everyday investors, but it is nowhere near enough for large institutions.
Robinhood also has another problem. Its latest quarterly report says the Stock Tokens it launched in July are debt securities issued in Jersey, not actual shares in the companies they represent. Holders have no legal ownership rights in those companies and cannot claim dividends or voting rights. But the exemption needs token holders to have the same rights as people who own the actual shares.
Companies are also pushing back against having their shares turned into tokens. The OKX and Intercontinental Exchange joint venture is the first major test of the new rules, and the objections keep coming. The number has risen to 26 from 16 on October 19, with IBM, Oracle, Intel and IonQ among the latest companies to object, according to journalist Eleanor Terrett on X.
Companies have 30 days to raise objections. Over the weekend of October 24–25, an ad in The Wall Street Journal urged CEOs to use that time to speak up. Securitize CEO Carlos Domingo pushed back on X, saying the ad was misleading because it confused the process of turning shares into tokens with the places where those tokens are traded. Wall Street trade group SIFMA wants companies to have a say before their shares are tokenized, proposing that they give consent in advance and have 90 days to object.
Congress hasn't provided a clear answer either. On September 15, the Senate failed to advance the CLARITY Act, with the vote ending 49–50 after four Republicans joined Democrats in opposing it. Two days later, the SEC introduced its exemption, allowing the process to move ahead without waiting for Congress to pass a law.
For now, the SEC's exemption is set to run as a five-year pilot. Meanwhile, more major companies are objecting to having their shares turned into tokens. Robinhood CEO Vlad Tenev says the company will share more details about its US tokenization plans soon. But until the rules are clearer and companies know where they stand, getting large institutional investors on board could prove difficult.