WASHINGTON, D.C.— Benjamin Schiffrin, Director of Securities Policy for Better Markets, issued the following statement after the Securities and Exchange Commission (SEC) issued its so-called ‘innovation exemption’ to facilitate tokenized stock trading:
“Under Chair Paul Atkins, the SEC has proven that it will do anything to benefit the crypto industry. That now includes exempting crypto companies that want to facilitate tokenized stock trading from the federal securities laws. In doing so, the SEC endangers investors.
“The SEC has said that tokenized securities are securities. But that doesn’t matter if the SEC is going to exempt tokenized securities from the federal securities laws that protect investors, which is exactly what the ‘innovation exemption’ does. The ‘innovation exemption’ provides that the rules that govern stock trading, some of which have done so for over 90 years, do not apply if market participants are trading tokenized stocks.
“Today, the SEC has essentially created two regulatory regimes for stock trading. One regulatory regime governs trading traditional stocks, where investors are protected by longstanding rules. The other governs the trading of stocks in tokenized form and exempts market participants that facilitate this type of trading from the rules that protect investors.
“The SEC says this exemption is necessary because the business models of the market participants that wish to facilitate tokenized stock trading are incompatible with the rules that govern trading traditional stocks. That’s the wrong way to think about it. Technology should bend to shape the rule of law, not vice versa. Investors deserve the protections that the federal securities laws provide them when trading stocks, and the advent of new technology is no reason to deprive them of these protections, no matter how many times the SEC repeats the word ‘innovation.’
“Perhaps most troubling, the SEC admits that it acted through an exemptive order and not rulemaking because it wanted to address the ‘immediate concerns’ of the crypto industry that wants to facilitate tokenized stock trading. The SEC should be more interested in addressing the immediate concerns of investors, yet it gave investors no opportunity to object to an order allowing companies that want to trade tokenized stocks to evade the rules with which all other market participants that trade securities must comply. The SEC’s action continues its shameful campaign to dismantle investor protections and betray investors.”
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
