SEC delays tokenized-securities exemption after White House and SIFMA pushback

The SEC canceled its Friday open meeting late Thursday, taking with it the venue where it had planned to brief firms on the long-promised innovation exemption for tokenized securities. CoinDesk reports, citing three people familiar with the matter, that the relief faces another delay after the White House and SIFMA objected to its legal footing and its impact on equity-market rules.

The exemption would have eased the path for firms issuing and trading tokenized securities on blockchain rails under existing securities laws. The commission had been expected to release it in part as soon as Friday — not through formal notice-and-comment, but as a briefing item during the session. Reg Crypto, the separate rulemaking for token fundraising, was also on the agenda. With the meeting gone, the exemption's near-term release went with it.

The format itself was a tell. An exemption of this reach ordinarily demands formal rulemaking and a public comment window; the SEC was prepared to brief it at a meeting instead. That shortcut may have invited the procedural scrutiny now coming from the agency's own staff.

The White House's worry, in the words of one person familiar with the discussions, is that the proposal could "kick a hornet's nest" while Congress negotiates the Digital Asset Market Clarity Act. Inside the SEC, staff have been weighing whether the agency has the legal authority to grant relief this wide, and whether the economic analysis and procedural steps needed to justify an exemption are complete. Industry insiders have been told the effort may wait for the Clarity Act's outcome, one person familiar with the talks said.

On the Wall Street side, SIFMA — the trade group whose members include the major broker-dealers — has emerged as one of the main forces holding up the initiative, according to one industry source. The objections center on how blockchain-based trading venues fit inside existing equity-market rules, specifically the duty to secure the best execution for clients. Regulation NMS links prices across exchanges and generally requires brokers to execute at the best protected quotation available. When tokenized securities trade through decentralized venues or automated market makers, pricing and execution costs do not map cleanly onto that framework. SIFMA did not respond to a request for comment, CoinDesk reported.

The SEC has already moved against one part of that architecture. In June it proposed eliminating Rule 611 of Regulation NMS, the Order Protection Rule, a step widely read as removing one of the biggest regulatory obstacles to tokenized trading. Elimination alone does not answer the harder question — in a venue without a national best bid or offer, what does best execution mean. The innovation exemption was meant to be the companion piece, the part telling firms how to issue and trade under existing law. It is now the open question.

The delay lands days after SEC staff cleared Franklin Templeton's tokenized money fund for cash and collateral duty through a no-action letter — evidence the agency can move fast when a product fits a familiar framework. A money fund under Rule 17f-2 is a custody question; it could wait out a delay. A tokenized equity is a market-structure question — and market structure is where the objections live.

Both objections point the same direction. The White House and the SEC's own staff see a broad exemption crafted before the Clarity Act is settled as a liability, vulnerable to being outrun by legislation or tied up in procedural challenge. SIFMA's members are the broker-dealers bound to a best-execution regime built for a different architecture, and they want the rules settled before the product runs. The near-term calendar for tokenized equities now runs through Congress, not the SEC's docket. If the Clarity Act arrives with language that covers tokenized trading, the exemption becomes a footnote; if it stalls, the SEC keeps the harder job of mapping best execution onto blockchains by itself.