SEC plan favors tokenized US equities

TLDR

The SEC has proposed scrapping two core equity trading rules in a way that removes a major structural barrier for tokenized US stocks, especially on DeFi platforms.

1. The SEC wants to repeal Regulation NMS Rules 611 and 610(e), replacing them with a more flexible best execution regime now open for a 60 day comment period.
2. These rules were fundamentally incompatible with automated market makers, so removing them is seen as one of the biggest unlocks yet for trading tokenized US equities in DeFi.
3. The change is not live yet, and key hurdles around exchange registration, settlement, and investor rights still need to be solved before tokenized US equities can scale safely.

Deep Dive

1. What The SEC Is Proposing

The SEC has proposed repealing Regulation NMS Rule 611 (the Order Protection Rule) and Rule 610(e), which together enforce best price routing and ban locked or crossed quotes across US equity venues. The proposal is framed as a way to simplify market structure, cut connectivity costs, and let competition and innovation drive equity trading more than rigid routing rules do, according to the SEC and Commissioner Paul Atkins in the official proposal discussion.

If adopted, the SEC would lean on broker level best execution standards such as FINRA Rule 5310 instead of hardwired intermarket routing rules. The proposal is in a 60 day public comment window, with several analysts expecting final rules no earlier than early 2027, though limited exemptions or pilots for tokenization could appear earlier.

2. Why This Helps Tokenized US Equities

Today, any tokenized stock that references a US listed equity is expected to respect the same trade through and quote rules as traditional venues. Automated market makers (AMMs) cannot do that, because they price from liquidity pools and do not pause trades to check other exchanges.

Galaxy Digitals Alex Thorn called Rule 611 one of the biggest structural barriers to tokenized US stocks on DeFi, arguing that any AMM pool in a tokenized NMS stock would constantly commit trade throughs and be an illegal trading center under current rules, a view echoed in several industry analyses. Removing 611 and 610(e) and relying on principles based best execution makes it much easier to design compliant broker and venue structures around tokenized equities.

At the same time, tokenized equity markets are already growing. For example, Binance and others have launched fully backed tokenized US stocks, and on chain equities have scaled into the low billions of dollars, reinforcing why regulators are rethinking legacy rules.

3. What Still Needs To Happen And Key Risks

Even if these rules are repealed, tokenized US equities still face several hurdles:

1. Venues handling tokenized NMS stocks likely need exchange or ATS registration, plus compliant clearing and settlement.
2. Tokens referencing US equities must clearly define investor rights, including dividends, voting, and redemption, and many current products are economic entitlements only.
3. The SEC is working on a narrow innovation exemption that early commentary suggests would focus on digital versions of existing listed stocks, not broad new token classes.

There is also political and industry risk. Traditional exchanges have already pushed back on tokenization frameworks, and final rules could be narrower than current drafts.

Conclusion

The SECs move to scrap key Reg NMS rules shifts US market structure toward a regime that can, for the first time, realistically accommodate tokenized US equities, including those integrated with DeFi. The opportunity is large, but it will only be realized if rulemaking, venue licensing, and rights frameworks converge in a way that lets tokens carry true equity exposure while staying inside securities law.