The U.S. Securities and Exchange Commission (SEC) moved into the center of the tokenized stocks debate after proposing to scrap market-structure rules that could limit how blockchain-based equity markets operate.
According to the official release, the proposal targets Rule 611 and Rule 610(e), two rules tied to order protection and price quotes in the national market system.
The proposal now enters a 60-day feedback period. If the SEC moves forward, tokenized stock platforms could gain a clearer path to operate in DeFi, although the final rule may still change after comments from exchanges, crypto firms, and market-structure specialists.
Why the SEC Proposal Matters
That matters because Rule 611 restricts “trade-throughs,” where an order is executed at a worse price than one available elsewhere. For traditional stock exchanges, that rule is meant to protect investors. For decentralized platforms, however, it can create a legal problem because automated market makers execute trades against pool prices that constantly move.
Galaxy head of research Alex Thorn said on X the SEC proposal could be one of the biggest unlocks yet for tokenized U.S. stocks, arguing that it would remove a major structural barrier for tokenized equities trading in DeFi.
Traditional stock trading has rules that say: a trade should not happen at a worse price if a better price is available somewhere else. This is called a “trade-through” rule.
How to Get Free Crypto
Simple tricks to build a profitable portfolio at zero cost
But crypto automated market makers (AMMs) do not work like traditional stock exchanges. An AMM is just a pool of tokens controlled by code. When someone trades, the trade happens at the price currently set by that pool.
The problem is that the AMM usually does not check every other exchange or platform to see if there is a better price somewhere else. It also cannot easily pause the trade just because another market has a better quote.
So, if tokenized stocks were traded through AMMs under the current stock-market rules, those pools could constantly break the rule by executing trades at prices that are not the best available in the whole market. That is why Alex Thorn says AMMs could be treated as illegal trading venues under the current framework.
The SEC may replace these rules with a broader “best execution” standard. That would still require platforms to try to get users fair prices, but it could be flexible enough to allow AMMs to operate legally.
Wider Regulatory Changes in the U.S.
The move also fits a wider regulatory shift. The SEC launched “Project Crypto” in August 2025 to develop rules for digital assets and blockchain use in U.S. markets.
In other words, the SEC is not only looking at one stock-trading rule — it is trying to decide how crypto, tokenized assets, and traditional finance can work under clearer regulation.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
