Tokenized securities for advisors: what the holder actually owns

What the SEC did, in order

Between December 2025 and September 2026 the SEC and its staff took nine actions that decide what a tokenized share is, who keeps its record, and where it may trade. Two cautions first. Staff statements and no-action letters are staff views: the January statement says it “has no legal force or effect.” And a proposed rule binds no one until the Commission adopts it.

Four models, in advisor terms

The January statement sorts tokenized securities by who does the tokenizing. If the issuer or its agent does it, the security is issuer-sponsored. If an unrelated firm does it, the security is third-party-sponsored. Each side splits in two.

The token is the share. The issuer’s agent builds the blockchain into its list of owners, so that “a transfer of the crypto asset on the crypto network results in a transfer of the security on the master securityholder file.” The staff says the only difference from a share in traditional form is that the list lives on a blockchain instead of in an ordinary database.

The token points at the share. The issuer keeps its list off chain and gives holders a token that “does not convey any rights, obligations, or benefits of the security.” Moving the token tells the agent to update its list. The share moves when the list changes, not before.

The token is a custodian’s entitlement. A firm holds the real share and issues a token for the holder’s claim on it, “such as a tokenized security entitlement.” This is the claim a brokerage statement shows, in a new format.

The token pays like the share. The firm issues its own security: a linked security, such as a structured note, or a security-based swap. The staff says a linked security “is not an obligation of the issuer of the referenced security and confers no rights or benefits from the issuer of the referenced security.” A swap “typically does not convey to the holder any equity, voting, information, or other rights with respect to the referenced security.” The name on the token does not decide the model; the staff looks to “the economic reality of the instrument rather than the name given to the instrument.”

The model is the first fact in the file because every later answer depends on it: who can fix a wrong entry, who the client stands behind in a bankruptcy, and whether the token may trade on the new venues at all.

The fifth path: a share tokenized at DTC

The Depository Trust Company holds securities for the brokers and banks that are its participants; DTCC says DTC holds assets worth over $114 trillion. The company’s list names DTC’s nominee, Cede & Co., and each broker’s client sees the share on the broker’s books. The December 2025 no-action letter lets a participant turn part of that holding into tokens.

The mechanics are set out in the letter. A participant with a Registered Wallet instructs DTC to tokenize its holding. DTC moves the shares from the participant’s account to a Digital Omnibus Account and mints a token to the participant’s wallet. Tokens move only between Registered Wallets, and “Only DTC Participants would be permitted to register wallets.” DTC tracks every move with an off-chain system called LedgerScan, and “LedgerScan’s record would constitute DTC’s official books and records.” Through all of it, the shares “would remain registered in the name of Cede & Co., DTC’s nominee.” The eligible list is the Russell 1000, Treasury bills, notes, and bonds, and ETFs that track major indices such as the S&P 500 and Nasdaq-100.

In the staff’s scheme this is the custodial model. The January statement cites the DTC letter in that section. It earns its own place in a file for three reasons. The intermediary is the central depository, not a new firm. The token keeps the share’s CUSIP. And the exchanges will trade it on the same book as the ordinary share: Nasdaq’s approved rule requires the tokenized share to be fungible with the ordinary share and to carry its CUSIP number and symbol, and trades settle T+1.

A client does not hold this token in a wallet. The broker does, and the client’s statement shows the share. DTCC ran production trades on 2026-07-15 with more than 30 firms and plans to launch the service in October 2026. Until then no client can hold one.

What changes hands when the token moves

A token transfer is one event on a blockchain. What it moves in law differs by model.

• On-chain issuer record: the share itself. The token move is the entry on the list of owners.
• Off-chain issuer record: an instruction. The staff says the token transfer “operates to notify the issuer (or its agent) to record the transfer of ownership of the security on the master securityholder file.” Between the token move and the agent’s entry, the chain and the list can disagree. The list wins.
• Custodial: the entitlement. The custodian’s books move the claim; the share stays in the custodian’s name.
• Synthetic: the note. Nothing changes at the company. Ondo tells its holders, “you will not see your name on the share register for the underlying assets.”
• DTC-tokenized: the entitlement between two participants’ wallets. DTC’s record changes; Cede & Co. stays the registered owner.

Programs that reference the same share do not quote the same price, and the gap is not a mispricing to trade on. Ondo says: “One token does not necessarily represent the value of one share, and the price of one token will not always match the price of the underlying asset.” Its tokens reinvest dividends, so one token can come to track more than one share. xStocks apply a multiplier for dividends and splits; on Solana “the raw onchain balance remains constant” and the change shows only in display. Two quotes are comparable only after each is converted to shares per token on the same date. Ketju prints no cross-program price gap until it can compute one per share, at the same minute, from primary data. The Commission warns that prices on the new venues “could dislocate from the prices of the NMS stock in traditional format,” because a pool prices from the ratio of assets it holds.

Who holds the official record

For a U.S. security, the list of owners that counts is the master securityholder file, usually kept by a transfer agent registered with the SEC. The September proposal calls it “the authoritative record of who owns an issuer’s securities.” It would let that file be spread across linked systems of the agent’s choosing, “provided the transfer agent maintains at all times exclusive control over the master securityholder file.” The Commission also asks how to treat records that “exist solely on a blockchain or distributed ledger that is not exclusively controlled by the transfer agent.” That is the question to ask of any token: can the agent, alone, change the record?

The Franklin Templeton letter shows what exclusive control looks like in practice. Franklin’s transfer agent keeps the fund’s list of owners in a system that joins an internal database to one or more blockchains, and it holds a separate set of administrative keys. The letter records that “The Administrative Controls permit FTIS to maintain, correct, freeze, migrate, or restore the official record of share ownership in the Integrated System.” Franklin represented that a compromised or misused wallet key “would not, by itself, establish a different official ownership record.” The staff’s no-action position rested on those representations. For a client, the wallet key is not the last word. The agent is.

The proposal would also put this on paper each year. A new Question 5(b) on Form TA-2 asks each agent to name its “Tokenization Agent(s)” and “Distributed Ledger Technology Platform(s).” A new Question 6(b) asks it to count the issues it services by model, issuer-sponsored or third-party-sponsored. And proposed Rule 17ad-31 would bar agents from helping unregistered sales unless they have “a reasonable basis to believe” the sale does not break Section 5 of the Securities Act. If adopted, the agent becomes a gatekeeper on resale, and its filings name the platforms it uses.

A synthetic token has no transfer agent of the company behind it. xStocks put it in one line: “The token is the certificate. Holding the token constitutes holding the instrument.” The instrument is the note. The share’s record sits elsewhere, in a custodian’s name.

What “same rights” means, and what it does not

The phrase has a defined meaning now. Under the Innovation Exemption a tokenized share gives “the same rights and privileges” as the ordinary share if it “conveys the same interest in the company,” the same dividends, the same votes, and “the same share of the residual assets of the company upon liquidation.” A third party that tokenizes someone else’s stock must pass along proxy materials “at no cost to the issuer or the shareholders.” Nasdaq’s rule uses the same test. Three things sit outside it.

It does not bring SIPC. SIPC says it “only protects the custody function of the broker dealer.” A DTC-tokenized share held by a SIPC-member broker for its customer is still in that broker’s custody, and the ordinary SIPC analysis starts there. A token in a client’s own wallet has no broker custody for SIPC to restore. Same rights against the company say nothing about who holds the asset.

It does not mean the token can be delivered to a brokerage account. Ondo tells holders, “you can redeem your Tokens for cash or stablecoins for the then-value of the underlying assets.” That is cash, not shares. xStocks run an in-kind route, xPort, through the broker Alpaca, where “xStock tokens can be redeemed back into shares at any time for use within Alpaca.” It requires onboarding with both the issuer and Alpaca, and xStocks are not offered to U.S. persons at all.

It gives no claim on the company from a note. Both synthetic programs in the Register say so in their own words. Ondo: “An Ondo tokenized stock is a structured note: a debt instrument issued by Ondo Global Markets (BVI) Limited,” and holders “do not have shareholder voting rights, shareholder information rights or other shareholder rights from the issuer of the underlying securities.” xStocks: “Each xStock is a bearer debt instrument classified as a tracker certificate,” and “It does not confer shareholder voting rights.” Neither is offered to Americans. Ondo sells “only to persons who are (i) located outside the United States”; xStocks “are not marketed, offered, or solicited in the United States, to U.S. Persons, or in any other prohibited jurisdiction.” Ketju rejected both; the xStocks memo and the Ondo Global Markets memo give the reasons.

The Innovation Exemption: conditions an advisor can check

On 2026-09-17 the Commission exempted Tokenized Securities Venues from the definition of “exchange,” and certain liquidity providers in their pools from the definition of “dealer.” The order runs “until September 17, 2031.” The venue carries the conditions. An advisor can check most of them from public documents:

• The token is tokenized listed stock, issuer-sponsored or third-party custodial. The order excludes “securities where a third party issues a crypto asset representing its own security that provides synthetic exposure to an underlying security.” By that definition a tracker note such as an xStock or an Ondo token cannot trade on a venue under the order.
• The venue verified that the token gives the same rights and privileges as the ordinary share.
• For a share tokenized by a third party, the venue sent the company written notice and waited at least 30 calendar days. If the company objected in time, the venue cannot list the token, and must say so in its public notice within five business days.
• The venue is a U.S. person, and it published a plain-English public notice at least 30 calendar days before it began operating. The notice describes who may trade.
• Every pair has a tokenized listed stock on one side. The other side is another tokenized stock, a non-security crypto asset such as a payment stablecoin, or a tokenized money-market fund.
• Trading stops whenever trading in the share stops on its primary listing exchange.
• Tier 1 stocks, the Limit Up-Limit Down Plan’s Tier 1, are capped at 75 symbols and 0.25 percent of the prior month’s average daily share volume. Tier 2 is capped at 250 symbols and 2.5 percent. After a first breach of a volume cap, each further breach pauses that symbol for three months.
• The venue publishes free, machine-readable trade data in dollars for the past 30 days, updated within ten minutes of each trade: symbol, price, size, time, and direction, plus each pool’s contract address, daily volume, and end-of-day size.
• Its smart contracts are public, auditable, and on a public, permissionless blockchain.
• No new shares are issued on the venue.

A venue’s 30-day notice period means none can operate before mid-October 2026. A listing on a venue is not a judgment about the token. And the order grants no relief under the Investment Company Act, which matters for the tokenized money-market funds that sit on the other side of a pair.

Where the exposure fails

Each model has its own failure. The file should name the one that applies.

The note issuer defaults. A synthetic holder is a creditor of a special-purpose company. The staff warns that holders “may be exposed to risks with respect to the third party, such as bankruptcy, to which a holder of the underlying security would not necessarily be exposed.” Both programs give a security agent power over the backing shares. At Ondo, Ankura Trust Company holds “a first-priority, perfected security interest” and on default can “take possession of this collateral, exchange it for cash, and distribute the proceeds to tokenholders.” At xStocks, “the Security Agent may take control of the collateral accounts, liquidate the underlying assets, and distribute proceeds to token holders in accordance with the prospectus terms.” The recovery is cash, after a sale, on the prospectus’s timetable. It is not a share.

The intermediary fails. A custodial holder depends on Article 8 of the Uniform Commercial Code. Securities an intermediary holds for its customers “are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary.” But if the intermediary is short, each holder’s interest “is a pro rata property interest” in what is there. DTC’s request, attached to the staff letter, says securities held at DTC are “bankruptcy remote” from DTC. A smaller custodian may be sound, and the file should name it and state which law governs its books.

The agent corrects the record. Every model that keeps an official record keeps the power to change it. DTC’s technology standards are meant to ensure it can “address any erroneous entries, lost tokens, or malfeasance,” and the letter states that “DTC would have the technological capability to transfer any of the tokens to address Conditions Requiring Reversal.” Franklin’s agent can “correct, freeze, migrate, or restore” the record. The same power that rescues a client who loses a key can move tokens out of a client’s wallet. That is not a defect in a regulated security; it is a fact the file must name, with the document that grants the power. Ketju’s WTGXX file lists each power read from the contract: allowlist, freeze, pause, clawback, mint, and upgrade.

What belongs in the diligence file

• The file names the SEC staff model the token fits, and cites the page of the offering document that shows it.
• It names who keeps the official record, whether that party is a registered transfer agent, and whether it alone can change the record.
• It says what the client can enforce and against whom: the company, a custodian, or a note issuer.
• It quotes who may buy, hold, and redeem under the issuer’s terms, and whether U.S. persons are excluded.
• It states how the position exits: redemption into shares, redemption into cash, or a sale, and on which days.
• It lists every power over the token contract, who holds it, and the document that grants it.
• For a DTC-tokenized share, it names the broker that holds the token and the account where the share appears.
• For a trade on a venue, it keeps the venue’s notice, the date it was read, and the feed that reports the trade.
• It records the dated event that would reopen the review.

Ketju keeps one eligibility file per program with these facts in the issuer’s own words. Continue with tokenized assets for RIAs for the wrapper mechanics, or tokenized Treasuries for the fund case.