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SEC, CFTC Advance Crypto Market Rules After CLARITY Act Setback
Tokenized Stocks, Longer Trading Hours and Developer Relief Move Ahead Separately
TL;DR
- The SEC approved a temporary pathway for tokenized U.S. shares while separately examining longer securities-market trading hours.
- The CFTC extended conditional no-action treatment to software developers connecting users with regulated derivatives markets.
- The agency actions followed the Senate's failure to advance the CLARITY Act but do not replace comprehensive federal legislation.
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The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission moved ahead with separate digital-asset and market-structure initiatives on September 17, 2026, after the Senate failed to advance the CLARITY Act. The SEC created a five-year exemption for qualifying tokenized-securities venues and separately examined longer securities-market trading hours, while the CFTC issued conditional no-action treatment for software developers that connect users with regulated derivatives markets.
The SEC's tokenized-stock action established an Innovation Exemption under which approved participants can trade blockchain representations of shares already listed on U.S. exchanges. The framework keeps tokenized shares within securities regulation while giving qualifying trading facilities temporary relief from registering in the same manner as conventional exchanges. The exemption is scheduled to expire on September 17, 2031, unless the SEC amends it earlier.
Tokenized shares covered by the framework are intended to represent actual securities rather than synthetic copies. They should retain the same basic rights as conventional shares, including voting rights, dividend rights and rights to remaining corporate assets in a liquidation. Trading could occur outside conventional market hours with faster settlement, while investors could potentially hold the securities in eligible digital wallets instead of conventional brokerage investment accounts.
Participation remains permissioned rather than operating as an unrestricted DeFi market. Prospective participants must obtain approval from venue operators and comply with sanctions and applicable rules and regulations. Companies can prevent unrelated third parties from tokenizing their shares, and trading in a tokenized security must stop when trading in the corresponding stock is halted. The exemption also prohibits initial share offerings, margin trading and other forms of borrowed trading.
The SEC imposed separate limits for large and less actively traded U.S. shares:
Venues cannot begin operating immediately under the exemption. Operators must publish detailed information at least 30 days before launch. The structure therefore allows onchain trading of existing U.S.-listed securities under defined access, issuer-control, trading-halt and volume requirements rather than opening the broader equity market to unrestricted blockchain trading.
The framework reflects one principle contained in the stalled CLARITY Act: putting a share on a blockchain does not stop it from being a security. The legislation also contemplated adjusting how existing custody, recordkeeping and settlement requirements apply to transactions and systems using blockchain technology. The SEC's order similarly leaves the legal status of the underlying securities intact while modifying how qualifying venues can facilitate their trading.
The exemption does not replace the broader legislation. It does not resolve which crypto assets fall under SEC or CFTC jurisdiction, establish permanent rules for crypto exchanges or settle the broader treatment of DeFi. The SEC order also does not address taxation. The Digital Asset Tax Certainty Act could clarify how stablecoins used to purchase tokenized shares are treated.
SEC Examines Longer Securities-Market Trading Hours
About an hour after the tokenized-securities action, the SEC held a roundtable at its Washington headquarters examining trading beyond the traditional weekday daytime schedule. Information on that discussion was published with officials considering how tokenization and other market-structure changes could support securities trading over longer periods.
SEC Chairman Paul Atkins framed expanded trading hours as a way for investors to respond more quickly when events occur outside conventional sessions. “We're moving of course to a new day — and night,” Atkins said. He added that “investors will be able to react more quickly to events.”
Atkins also connected tokenization with changes in securities-market operations. “I believe that tokenization holds the potential to help the securities industry achieve a real-time inventory management, which could drive efficiency, reduce settlement failures, mitigate the risk of abusive naked short selling, with the goal of eliminating that possibility altogether,” he said.
Atkins said he had asked SEC staff to examine how expanded market access could operate alongside safeguards. “Therefore, I've asked the staff to consider what steps can be taken to dovetail a growth-friendly environment with protections against harmful market behavior.”
SEC Commissioner Hester Peirce pointed to the contrast between traditional securities sessions and continuously operating digital-asset markets. “Crypto markets certainly don't sleep,” Peirce said. She identified potential concerns including wider bid-ask spreads, greater price volatility, less time to address technology problems and difficulties ensuring transactions remain properly monitored when human staffing is limited.
“These concerns are the real consequences of extending trading into hours when human involvement is limited,” Peirce said. She also cited the possibility of “social media rumors tanking your stock while your corporate office slumbers” as an example of the operational pressures that extended-hours trading could create for public companies.
Atkins said preparations for longer trading schedules were already progressing, saying that “several needed preparations are already underway or in place.” The SEC's discussion remained separate from the tokenized-securities exemption, even though both measures formed part of the agency's broader examination of how U.S. securities markets could operate with blockchain infrastructure and expanded trading schedules.
CFTC Broadens No-Action Treatment for Software Developers
The CFTC separately issued a no-action position for software developers, saying it would not recommend enforcement action against qualifying developers for failing to register as introducing brokers when specified conditions are met. The action built on earlier relief involving crypto wallet provider Phantom, which had sought to add derivatives-trading functionality to its software.
The expanded position applies to software developers that act as a pipeline connecting users with designated contract markets, provided they satisfy requirements including specified disclosures and appropriate policies and procedures. A footnote in the CFTC position indicated that the approach could extend beyond “crypto asset related software,” potentially making the framework applicable outside crypto-related products.
Solana Policy Institute General Counsel Patrick Wilson said the change converted case-specific relief into a broader framework. “This is a significant step forward because it takes what was previously Phantom-specific relief and turns it into a framework that other software providers can build around,” Wilson said. “That gives builders more clarity about how they can connect users to regulated derivatives markets without being treated as introducing brokers.”
The Digital Chamber CEO Cody Carbone also supported the CFTC action. “This removes a major regulatory ambiguity that's chilled software innovation in derivatives markets,” Carbone said in a post on X.
Both agencies had indicated they would continue pursuing their own regulatory agendas after the Senate's procedural failure to advance the CLARITY Act. Industry participants had supported legislation partly because enacted law would offer greater durability than agency-level exemptions or no-action positions, which can be changed by future regulators.
An unnamed crypto industry source described that durability risk directly. “It is great news that this is expanding and getting better, but there is still some potential risk of having these things undone in the future by a future commission.”
The same source said broader adoption could nevertheless make the approach harder to reverse in practice. “I do think the more people who adopt this and the more people who operate within this framework, the stickier it becomes, the harder it is to yank that rug in the future.”
CFTC Chair Michael Selig had discussed a more permanent path in May 2026, when he alluded to converting the earlier Phantom no-action approach into formal rulemaking. That rulemaking had not materialized by the time of the September action, leaving the current developer relief more susceptible to future changes than a finalized rule or enacted statute.
The regulatory developments remain legally distinct. The SEC's Innovation Exemption applies to qualifying tokenized-securities venues, its trading-hours work addresses the operating schedule and structure of securities markets, and the CFTC's no-action position addresses circumstances under which qualifying software developers can connect users with designated contract markets without introducing-broker enforcement action.
This article has been refined and enhanced by ChatGPT.
