Tokenized Securities Under the Microscope: What Companies Should Know After the SEC’s Clarification

On January 28, 2026, the U.S. Securities and Exchange Commission’s Division of Corporation Finance, Division of Investment Management and Division of Trading and Markets issued a Statement on Tokenized Securities that provides additional clarity regarding the treatment of tokenized securities under the U.S. federal securities laws. First, the statement reiterated that tokenized securities recorded on distributed ledgers remain subject to the full scope of U.S. federal securities laws, and that tokenization represents a change in technological process, but not in the underlying legal analysis under securities laws. In other words, tokenization changes the underlying infrastructure at play, but does not, in and of itself, change the applicable regulatory regime.  The statement then lays out a helpful taxonomy for tokenized securities.

While non-binding, the statement’s taxonomy provides a roadmap for how SEC staff may analyze tokenization structures going forward, leaving less room to rely on “lack of clear guidance” arguments.

The statement lays out the primary ways it sees tokenization of securities occurring and the associated differences:

Issuer-Sponsored Tokenized Securities

The statement notes that issuers themselves may either:

• Issue securities directly as crypto assets by using distributed ledger technology to directly record the owners of the securities, with off-chain records solely used for certain secondary information (e.g., security holder name and address)
• Keep the master securityholder file off-chain (e.g., a traditional transfer agent), but issue tokens representing the securities on-chain, whose transfers then notify the issuer to record a transfer of the security on the off-chain master security holder file

The statement clarifies that in both cases securities laws are implicated. Either the tokens are securities themselves, or the transfer of tokens is used to reflect transfers that are securities transactions, and therefore subject to federal securities laws.

The statement also notes that tokenized and traditional formats with substantially similar rights and privileges may be treated as the same class for certain federal securities law purposes.

Third-Party Tokenized Securities

Separately, entities unaffiliated with the issuer can tokenize that issuer’s securities in multiple ways. This includes custodial tokenized securities, where the underlying security is held in custody and represented by a token, and synthetic tokenized securities where tokens mimic economic exposure to a security without conveying underlying rights.

The SEC statement cautions that under third-party sponsored models the rights, obligations, and benefits associated with the token may or may not be materially different from the underlying security they represent. Further, under these third-party arrangements, holders of the token may be exposed to additional risks with respect to the third party, such as bankruptcy. Synthetic tokenized securities may also be “security-based swaps,” adding an additional layer of potential regulatory compliance for these token issuers.

If a synthetic token is characterized as a security-based swap, that characterization may significantly constrain (or effectively foreclose) certain retail-facing distribution and trading pathways. Moreover, the involvement of a party that is not affiliated with the underlying issuer adds regulatory complexity that may, depending on the underlying facts and circumstances, also implicate the Investment Company Act.

Why The SEC Statement on Tokenized Securities Matters

Tokenization promises enhanced liquidity, operational efficiency, and access for investors, particularly in private markets. The SEC’s statement takes two key steps in advancing the tokenization of securities going forward:

1. It reinforces a fundamental principle long embedded in U.S. federal securities law: the underlying substance of the instrument, not the technology used to record or transfer it, determines whether it is a security.
2. The SEC acknowledges and provides workable frameworks for parties looking to tokenize securities to consider and utilize.

Taken together, these themes signal to parties looking to issue or facilitate trading in tokens tied to securities that adopting distributed ledgers does not reduce regulatory requirements, and careful thought needs to go into the structure of the proposed tokens to clearly lay out to investors the substance of what they are receiving.

Key Takeaways for Companies

• Greater Clarity for Designing Tokenized Securities: Clearer regulatory expectations provide more opportunities for issuers to explore tokenization initiatives, but within the established framework of U.S. securities laws.
• Token Design Will Continue to Require Careful Analysis of Securities Law Implications: Tokenization alone does not change an instrument’s status under federal securities laws. Companies should approach tokenization with the same rigor as any traditional security issuance, including evaluation of registration or exemption strategy, disclosure obligations, and corporate governance implications.
• Take a Moment to Assess: As a practical design check, companies looking to issue tokens for existing securities should map what the token represents (issuer security vs entitlement vs synthetic exposure), who the obligor is (issuer vs third party), and where the definitive ownership record lives (on-chain or off-chain).
• Operational Adjustments Need to Be Analyzed: Issuers intending to use tokenized securities need systems to ensure that blockchain transfers are properly recorded and reconciled with official shareholder records and comply with applicable legal requirements. This may include integrating transfer agent and custodian roles into on-chain processes consistent with federal securities law.
• Reduced Ambiguity Cuts Both Ways: The statement’s clearer taxonomy may help market participants design tokenized securities, but it also may leave less room over time for parties to argue that sufficient regulatory clarity was lacking. Companies should document their structuring analysis contemporaneously (including what the token represents, who the obligor is, and how ownership is recorded).

Law clerk Andrew Silverstein contributed to this alert.