SEC Staff Statement on Tokenized Securities – Innovation as a Regulated Evolution

On January 28, 2026, the SEC’s Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets (collectively, the “Division Staff”) issued a joint statement outlining their views on the taxonomies associated with tokenized securities, i.e., traditional securities formatted as or represented by a crypto asset with ownership records maintained in whole or in part on a crypto network. The statement does not provide relief or establish a new regulatory framework; rather, it reflects the Division Staff’s view that existing U.S. federal securities laws apply to tokenized securities and that market participants must carefully assess how tokenized offerings are structured and characterized.

Key Takeaways

• Tokenized securities are regulated securities under U.S. federal securities laws. The Division Staff emphasizes that securities laws apply regardless of whether a security is tokenized, and that the format in which a security is issued or the methods by which holders are recorded (e.g., onchain vs. offchain) does not affect application of the federal securities laws. At the same time, the statement makes clear that how a security is tokenized matters, particularly for ownership records, custody, and investor rights.
• Third-party tokenization models raise specific legal implications. The Division Staff distinguishes between custodial tokenized securities, which represent traditional security entitlements merely recorded onchain, and synthetic tokenized securities, where a third party issues its own security or derivative providing synthetic exposure to an underlying security (such as a tokenized linked security or a tokenized security-based swap). Synthetic models may trigger Securities Act, Exchange Act, and, in some cases, Investment Company Act requirements, including eligible contract participant (ECP) and exchange-trading limitations applicable to security-based swaps.

Issuer-Sponsored Tokenized Securities

Where tokenization is undertaken by or on behalf of the issuer, the Division Staff describes two architectures:

• Integrated models, where the issuer integrates distributed ledger technology (DLT) into the system used to record owners on the “master securityholder file,” so that an onchain transfer results in a transfer on the master file (with onchain and offchain records linked); and
• Notification models, where the crypto network is not part of the master securityholder file, but token transfers operate as a notification mechanism to update offchain records reflecting the transfer of the underlying security.

In both cases, the Division Staff treats DLT as an alternative recordkeeping mechanism rather than a novel asset class. Issuers may also support multiple formats of the same class of securities (e.g., tokenized and traditional) or issue different classes in different formats, though the Division Staff cautions that instruments with substantially similar rights may be treated as the same class for certain purposes under the federal securities laws.

Third Party-Sponsored Tokenized Securities

Where a third party tokenizes securities issued by another person, the Division Staff draws a distinction:

• Custodial tokenized securities. In the custodial model, a third party issues a crypto asset representing an interest (direct or indirect) in an underlying security held in custody. The Division Staff treats these as traditional indirect holdings, merely formatted onchain, and states that “digital custodial receipt” models are not meaningfully different from this entitlement structure.
• Synthetic tokenized securities. In the synthetic model, a third party issues its own security providing synthetic exposure to a referenced security (e.g., tokenized linked securities or tokenized security-based swaps). The Division Staff notes that a third party may tokenize a security issued by another person by issuing a security-based swap formatted as a crypto asset. The Division Staff reminded the industry that a security-based swap cannot generally be offered and/or sold to non‑ECPs absent an effective Securities Act registration statement and on-exchange execution requirements for those non-ECP transactions.

Looking Ahead

The statement reflects the Division Staff’s view that tokenized securities are regulated securities under the federal securities laws and that securities laws apply regardless of format. The statement also recognizes that there are various tokenization models that raise specific legal and regulatory implications, including issuer direct, third-party tokenization, and tokens that function as “receipts for securities” or, in some structures, resemble security-based swaps. The statement also complements the Division of Trading and Markets’ December 2025 guidance[1] on broker-dealer custody of crypto asset securities, reinforcing a move away from treating tokenized securities as a special or exceptional category. Finally, the statement dovetails with and elaborates on Commissioner Peirce’s “Enchanting, but Not Magical” July 2025 statement,[2] reflecting that this type of innovation should be treated as a “regulated evolution” approach. It is expected that, in the near future, the SEC will release a sandbox framework to ease compliance burdens on new entrants. 

If you have any questions regarding this alert, please contact the authors.

[1] “Statement on the Custody of Crypto Asset Securities by Broker-Dealers” (Dec. 17, 2025).

[2] “Enchanting, but Not Magical: A Statement on the Tokenization of Securities” (July 9, 2025).