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ARTICLE · 30 SEPTEMBER 2026

Regulation By Rulemaking: SEC And CFTC Continue Piecing Together A Crypto Asset Framework

Lowenstein Sandler LLP
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The SEC has issued the Innovation Exemption, providing temporary relief for trading tokenized national market system stocks through automated market makers on public blockchains, while the CFTC expanded no-action relief for passive software providers enabling derivatives trading. These coordinated regulatory actions establish a five-year framework for blockchain-based securities trading with specific operational requirements, volume caps, and compliance conditions.

United StatesFinance and Banking
Ethan L. Silver
Ethan L. Silver
William Brannan
William Brannan
David Aron
David Aron
Aiden D. O'Leary
Aiden D. O'Leary
Macauley Venora
Macauley Venora
Leo B. Choi
Leo B. Choi

What You Need To Know:

  • The SEC issued an order granting temporary, conditional relief titled the Innovation Exemption, which provides exemptive relief for participants facilitating permissioned trading of tokenized national market system stocks (NMS Stocks) through automated market makers (AMMs) and liquidity pools (Liquidity Pools) on public, permissionless distributed ledgers.
  • The Innovation Exemption creates two parallel five-year exemptions: (i) a tokenized securities venue exemption (TSV Exemption) from the definition of “exchange” in Section 3(a)(1) of the Securities Exchange Act of 1934, as amended (Exchange Act), and (ii) a covered firm exemption (Covered Firm Exemption) from the definition of “dealer” in Section 3(a)(5) for qualifying proprietary liquidity providers. Both exemptions are effective from September 17, 2026, until September 17, 2031.

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