Overview
- On January 28, the SEC’s Corporation Finance, Investment Management, and Trading and Markets staff issued guidance stating that tokenization changes technology, not legal obligations under federal securities laws.
- The statement defines a tokenized security as a traditional security represented by a crypto asset with ownership records kept in whole or in part on one or more crypto networks.
- It outlines issuer‑sponsored and third‑party‑sponsored models, spanning on‑chain issuance, off‑chain notification, custodial entitlements, and synthetic or linked instruments, and notes that similar rights across formats may be treated as the same class.
- Synthetic or linked tokens may constitute security‑based swaps, which cannot be offered to non‑eligible contract participants without Securities Act registration and execution on a national securities exchange, and third‑party structures can introduce insolvency and potential Investment Company Act issues.
- The staff created no new exemptions or framework, aligning the position with the DTC no‑action letter and recent CFTC guidance, and emphasizing that recordkeeping method does not alter a security’s regulatory status.