How the opt-out works

The Innovation Exemption, a rule introduced by the US Securities and Exchange Commission in September, allows tokenized stocks to trade on platforms that are not fully registered exchanges, as long as they meet certain conditions.

The platform must notify the companies whose shares it plans to offer, and those companies then have 30 days to object.

OKX and ICE unveiled the venue in early October, publishing its first required public notice on October 4. At that point, just one company, AI chipmaker Cerebras Systems (NASDAQ:CBRS), had objected.

Through the rest of the month, more companies followed one after another. Broadcom (NASDAQ:AVGO), Verizon (NYSE:VZ) and UnitedHealth (NYSE:UNH) were among the first wave in mid-October, with Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Goldman Sachs close behind.

By the end of the month, the count had passed 50, with NVIDIA (NASDAQ:NVDA), Costco (NASDAQ:COST) and Nike (NYSE:NKE) among the latest names.

Part of the debate comes down to what a tokenized stock actually is. Thomas Eichenberger, chief strategy officer and deputy group CEO at Sygnum, a regulated Swiss digital-asset bank, told INN in emailed comments that the two main versions look alike on the surface but, legally and economically, are quite different.

“When a company issues its own shares on a blockchain, the token is the share,” he said. “When a venue issues a token that tracks a share it does not control, the token is a synthetic wrapper that references the stock from the outside.”

In the first case, the holder gets the rights that come with owning the stock, such as voting and dividends. In the second, the holder usually gets the price movement and little else, and has no direct legal relationship with the company. They also depend on the firm that built the token, and take on the risk that it fails.

“The economics can appear identical on screen; what the holder actually owns, and what they stand to lose, is materially different,” Eichenberger said.

He pointed to Switzerland, where the law brings the company in from the start. A blockchain-based security there is created through an agreement with the company that issues it, and that company is responsible for keeping the record in order.

The US has no equivalent.

According to Eichenberger, that means a token made without the company’s consent leaves investors holding something legally uncertain, with their rights to dividends, votes and redemption set only by how the platform is built.

“The earlier consent and clear rights are established, the less ambiguity there is later, and ambiguity is the one thing institutional capital will not tolerate,” he said.

Companies choosing to go on-chain

Nilmini Rubin, chief policy officer at Hedera, which runs its own blockchain network, said the OKXICE objections aren’t necessarily a rejection of putting shares on a blockchain.

In an email to INN, she said companies are wary of adding new risk to a system they already know and trust.

“Public companies have obligations to shareholders and want to weigh these decisions for longer than the 30-day window allows,” Rubin explained, adding that questions about custody, pricing, trading activity and how shareholder rights would work in practice remain unanswered. In her view, the pushback is aimed at this particular setup, not at the technology itself.

“These are inevitable growing pains, but they are far from insurmountable,” she said.

Eichenberger said a big part of it comes down to control. “Backing answers the question of value; it does not answer the question of control, record-keeping and how the company manages its own shareholder base,” he said.

There’s also the company’s reputation to think about. If the platform fails or gets hacked, the company’s name gets tied to the fallout even though it had no part in it and no way to prevent it.

“That is not resistance to tokenization,” Eichenberger said. “It is a reasonable expectation that the company is part of a decision about its own shares.”

For companies to feel comfortable, Rubin said a tokenized share “must still resemble a share in every meaningful sense.”

That means keeping voting rights, dividend payments, accurate ownership records and the ability to see who the shareholders are. Companies also want to know who is responsible for holding the shares, communicating with shareholders and sorting out problems when something goes wrong.

The SEC exemption already requires tokens to carry the same shareholder rights, she noted, but making that work in practice is another matter. Exchanges, custodians, companies and investors are at different stages of understanding the technology, and getting them all working under the same rules will take time.

“Ultimately, if tokenization introduces more complexity, we’ve missed the point,” Rubin said.

Commodities skip the consent question

Tokenized commodities don’t face the same consent issues as tokenized stocks, because a gold bar has no board of directors to object.

Gold-backed tokens, led by Tether Gold and PAX Gold, make up most of this market. Each is backed by physical gold held by the company that issues the token. Tokenized commodities have seen exponential growth as gold prices rallied over the last year and a half.

That doesn’t remove the risk – investors still rely on the issuer holding the metal it says it holds.

Eichenberger said that is why the commodities market has moved faster. Putting gold on a blockchain is mostly about proving the metal exists and is safely stored, while a share is a bundle of rights tied to a specific company.

“The commodities market is a useful proof that the technology works; equities are where the market-structure questions get settled,” he said.

Rubin agreed that commodities are a good first step, since they show what the technology can do without the complexity of company share ownership.

Investors still need confidence that the gold behind a token exists, has been independently checked, is securely held and can be redeemed, she said. Getting that right could build the confidence needed to bring stocks onto a blockchain.

What happens next

As for what would win companies over, both pointed to practical payoffs. Rubin listed lower administrative costs, simpler record-keeping and faster settlement of trades.

“Companies aren’t going to take on additional operational, legal and reputational risks simply to experiment with new technology,” she said.

“When the business case becomes clear, adoption follows,” she added.

Eichenberger said a company would need three things before putting its own shares on a blockchain: a law that makes clear the token is the real share, trusted and regulated systems for issuing, holding and settling it, and a real benefit, such as faster settlement, tidier shareholder records or access to new investors.

“Once those are in place, tokenization stops being an experiment and becomes simply a better way to run the plumbing,” Eichenberger said.

While most of the companies OKXICE picked have turned it down, not every company is saying no. A few are already taking the route Eichenberger describes and putting their own shares on a blockchain.

Securitize (NYSE:SECZ), a firm that builds tokenization tools, issued a blockchain version of its own stock on the same day it began trading on the NYSE in July. The company said the tokens are the same common stock that trades on the exchange, not a separate product.

OpenWorld (NASDAQ:OPNW), which began trading on October 1 after merging with VerifyMe, plans to offer a blockchain version of its shares on Figure’s On-chain Public Equity Network, known as OPEN.

Shareholders approved a new class of blockchain-based stock on October 16, and the company said on October 26 that the listing remains on track to go live by the end of the year. Shareholders would get the option to hold and trade their shares on a blockchain alongside the regular Nasdaq listing.

Separately, OpenWorld said on November 5 that a tokenized version of its stock is now available on the Solana blockchain, issued by a third party, Backpack Securities.

Another open question is how tokenized trading would link up with regular exchanges. Rubin said Nasdaq is right to worry about prices not matching across venues. The SEC has already set some limits, including caps on trading volume and trading pauses tied to traditional exchanges, but she said those are safety measures, not a real connection between the two markets.

The next step, in her view, is for regulators, exchanges and blockchain companies to agree on common standards for pricing, settling trades and moving assets between systems.

“Competition drives innovation, but investors shouldn’t pay the price for disconnected infrastructure,” Rubin said.

For now, the objections show the SEC’s opt-out rule working as designed. Companies have a say, and many large ones are using it. For investors, tokenized stocks could become a new way to trade familiar names outside regular market hours, but only for companies willing to take part.