SEC Expected to Postpone Tokenization Innovation Exemption Following White House and Wall Street Pushback

The SEC is reportedly scrutinizing its legal authority to grant broad regulatory relief for tokenization, focusing on whether the agency has conducted sufficient economic impact assessments and followed proper procedural requirements. Industry insiders suggest this initiative may be stalled until the outcomes of the Clarity Act are determined.

Traditional financial institutions have also voiced opposition to the proposal.

According to sources familiar with the matter, SIFMA—the Wall Street trade group representing major investment banks and broker-dealers—has been a primary voice opposing the SEC’s plan. SIFMA has not yet issued a formal comment regarding these reports.

The group’s primary concerns involve how blockchain-based trading platforms would integrate with current equity market regulations, specifically regarding the obligation of brokers to ensure best execution for their clients.

Under the current regulatory framework, Regulation NMS synchronizes prices across exchanges and requires brokers to execute trades at the best available protected quotation. This structure becomes complicated if tokenized securities are traded via decentralized venues or automated market makers (AMM), where pricing mechanisms and execution costs may deviate from traditional exchange models.

In June, the SEC proposed the elimination of Rule 611 of Regulation NMS, known as the Order Protection Rule. This proposal is widely regarded as a significant step toward removing regulatory barriers to the trading of tokenized securities.

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