The SEC has opened permissioned onchain trading to fully backed U.S. stock tokens, but the 32.5-hour trading week on NYSE and Nasdaq leaves automated markets without a live reference price for most of each 168-hour week.
Summary
- SEC relief permits qualifying tokenized U.S. stocks to trade through permissioned automated market makers.
- RedStone’s COO said nights, weekends and holidays could allow pricing gaps to build.
- Synthetic products remain outside the exemption, creating two token classes tied to the same shares.
- The five-year relief requires issuer notice, equivalent shareholder rights and coordinated trading halts.
The SEC’s temporary exemption allows qualifying venues to bring buyers and sellers together through permissioned automated market maker pools for tokenized National Market System stocks.
Under the order, each token must provide the same rights and privileges as an equivalent class of conventional stock. The SEC also placed limits on the number of available symbols and trading volume, while requiring public, auditable smart contracts deployed on permissionless blockchains.
Trading venues must stop onchain activity whenever the primary exchange halts the underlying stock. Ordinary closures at night, on weekends or during holidays are treated differently, leaving tokenized venues able to operate when NYSE and Nasdaq are not producing live prices.
Tokenized stocks lose their main price reference after hours
Marcin Kaźmierczak, co-founder and chief operating officer of blockchain oracle provider RedStone, told crypto.news that the missing reference market presents a more serious problem than liquidity fragmentation or arbitrage alone.
An automated market maker sets prices from the assets held in its own pool. Arbitrage traders can correct a price difference by buying in the cheaper market and selling in the more expensive one, but Kaźmierczak said the process weakens when the main U.S. equity market is closed.
“An AMM only prices off its own pool, arbitrage keeps that honest but only while the reference market is open, and NYSE/Nasdaq trade about 32.5 hours a week out of 168.”
During regular U.S. trading hours, market makers can compare an onchain token with the underlying share and trade away gaps. Overnight or during a weekend, however, the stock’s deepest venue is not publishing a current executable price.
At such times, an AMM may react to orders placed inside a much smaller liquidity pool. Large trades can move its quoted price even when investors cannot immediately buy or sell the underlying share to complete the other side of an arbitrage transaction.
The challenge does not fade as activity rises, according to Kaźmierczak. Higher order sizes can increase the price impact of each AMM transaction, while the number of hours without a live primary-market reference stays unchanged.
“It gets harder, not easier. Price impact per AMM trade grows with size, and the hours without a live reference price don’t shrink just because volume goes up.”
SEC rules create separate classes of tokenized stocks
Alongside the timing gap, Kaźmierczak pointed to a split between qualifying ownership tokens and synthetic stock products already available through offshore services.
The SEC order covers tokenized NMS stocks that give holders rights and privileges matching the traditional shares. Kaźmierczak said products such as Robinhood’s Stock Tokens and Kraken’s xStocks use separate structures and are not governed by the new exemption.
As a result, investors could see a conventional U.S. share, a fully backed ownership token covered by the SEC framework, and a synthetic or wrapped product associated with the same company. Each instrument may trade under different rules and carry different rights.
“So you don’t just get tokenized versus traditional, you get two classes of tokenized product for the same underlying stock, priced differently, under different rules,” Kaźmierczak said.
A recent Coinbase stock-token report showed how such rights can vary even when tokens have share backing. Coinbase’s products represent beneficial interests in shares held through an offshore special-purpose company and a regulated U.S. broker, while qualified holders can request redemption under specified compliance rules.
Coinbase has offered Base-native tokens tied to Apple, Nvidia, Meta and Alphabet to eligible non-U.S. investors. Its prospectuses state that legal title generally remains with a trust, meaning wallet holders do not appear directly on the underlying company’s shareholder register.
Redemption also depends on identity, location, sanctions, and anti-money laundering checks. According to the product documents, an onchain buyer who has not completed the process can transfer a token but cannot exercise redemption or voting rights until approved.
Issuer objections address ownership, not synthetic products
For tokens created by an unaffiliated third party, the SEC requires a venue to give the underlying company written notice and an opportunity to object before trading begins. The process addresses a governance dispute already visible between public companies and token issuers.
AMC Entertainment CEO Adam Aron recently objected after learning that Robinhood had created an AMC-linked token without the company’s approval. As previous coverage detailed, Robinhood Assets (Jersey) Limited issued synthetic exposure to more than 190 companies without giving holders ownership, voting power or standard shareholder protections.
Kaźmierczak cited the AMC dispute as an example of why the SEC included issuer notice and objection rights. Yet he said the rule’s effect remains limited because synthetic products outside the exemption do not have to follow the same process.
“The products causing that fight are synthetic and won’t even be governed by today’s framework,” he said.
Under the exemption, qualifying venues must also disclose information about their operations, trading and affiliated activity. The SEC granted separate conditional relief from dealer registration to certain liquidity providers using their own capital in the approved AMM pools.
The relief will expire five years after publication, while the agency has requested public comments on possible changes and subsequent regulatory action.
Around-the-clock markets depend on offchain infrastructure
Other tokenized markets have encountered a similar mismatch between continuous blockchain activity and financial systems that keep fixed operating hours.
In September, DBS and Citi completed a cross-border tokenized-deposit payment from Singapore to New York within minutes on a Saturday. A weekend funding analysis found that the transaction demonstrated continuous money movement but did not establish whether every underlying obligation reached final legal settlement at the same time.
Fedwire does not currently operate continuously through weekends, which can leave banks using tokenized payments dependent on prefunded balances or added liquidity buffers until central bank settlement systems reopen.
Stock tokens face a related data constraint rather than the same settlement issue. Kaźmierczak said keeping share-linked instruments aligned requires reliable price information when the underlying market is open and rules for periods when it is not.
“Price risk scales with data infrastructure. Consent risk scales with governance,” he said. “Neither is solved by this exemption alone, and both compound as volume grows.”
Product structures are also becoming more complex. Kraken recently introduced three xStocks vaults that accept SPYx, QQQx and NVDAx, offering estimated net annual yields of 2%, 2% and 1.8%, respectively, during the initial rollout.
The vaults use deposited tokens as collateral for stablecoin loans before routing funds through cross-chain decentralized finance strategies. Kraken’s disclosures identify liquidation, bad debt, smart-contract, cross-chain, and liquidity risks, while withdrawals generally carry a three-day waiting period and may take longer during market stress.