The U.S. Securities and Exchange Commission has again postponed its closely watched "innovation exemption" plan, a move that followed pressure from both the White House and Wall Street. CoinDesk, citing three people familiar with the matter, reported that the SEC had been set to release part of the exemption at a public meeting on Friday, but canceled the plan late Thursday.
White House worried about CLARITY Act talks
The White House’s concern was straightforward. Congress is still negotiating the Digital Asset Market Clarity Act, or the CLARITY Act, and a large unilateral exemption from the SEC at this stage could "kick a hornet’s nest," making crypto legislation harder to advance.
One person familiar with the matter said the industry had already received signals that the plan may need to wait for the outcome of the CLARITY Act process.
SIFMA says market structure reform should not come through exemptions
Wall Street has also been pushing back. The Securities Industry and Financial Markets Association, which represents large broker-dealers and investment banks, has emerged as one of the main sources of resistance to the SEC’s innovation exemption plan.
In a June 30 letter to the SEC, SIFMA said major market structure reform should move through an open and transparent legislative process, not through exemptions or no-action letters.
Its concerns center on a technical but important issue: how on-chain trading would comply with existing best-execution obligations.
Under Regulation NMS, brokers must seek the best available price for customers, with prices linked across exchanges. If tokenized securities trade in decentralized venues or through automated market makers, however, pricing and execution costs look very different from those in traditional exchanges. That creates a direct friction point with the current Regulation NMS framework.
The SEC in June proposed removing Rule 611, the order protection rule. Market participants saw that as a key step toward clearing one of the biggest regulatory barriers for tokenized securities. SIFMA’s position is that a change of that scale should not be made by way of exemption.
Questions are also rising inside the SEC
People familiar with the matter said the SEC has also been weighing internal doubts about its own authority. Those questions include whether the commission has enough legal power to issue an exemption of this scope, whether it has completed sufficient economic analysis, and whether the process would hold up procedurally.
The innovation exemption had already been prepared for release in May, but it was delayed then as well. At that stage, the dispute focused on synthetic tokenized securities and whether the exemption would allow third parties to issue tokenized stocks without the issuer’s consent.
That issue drew pushback from listed companies, and the SEC ultimately did not move forward. SEC Commissioner Hester Peirce said at the time that she expected the exemption would allow only tokens "corresponding to the same stocks that investors can purchase in traditional markets."
Tokenization work continues in the market
Even with the SEC delay, tokenization efforts on Wall Street have not stopped.
- Nasdaq and the New York Stock Exchange have both announced tokenized securities infrastructure plans.
- The Depository Trust & Clearing Corporation, or DTCC, completed its first tokenized securities transaction tests in a production environment last month.
- Citi analysts estimate that the tokenized asset market will reach $550 billion by 2030.
SEC Chair Paul Atkins has repeatedly voiced support for tokenization and described blockchain as a tool for modernizing financial markets. The dispute now is not over the goal, but over the route: whether to move first through legislation, namely the CLARITY Act, or first through exemption. For now, both tracks are on hold.
What the market is watching next
The report said that if the CLARITY Act passes in September, tokenized securities would for the first time gain a compliance framework backed at the congressional level, and the SEC’s innovation exemption could restart after that. If the bill stalls, the crypto industry may face a longer period of uncertainty.
Three items stand out for the next phase: progress of the CLARITY Act in the Senate, whether the SEC releases a separate proposal on Regulation NMS reform, and whether SIFMA offers an alternative approach instead of simply opposing the plan.