Notes
The Innovation Exemption Is a Clock on the Operating Model
On September 17, 2026, the Securities and Exchange Commission issued Press Release 2026-90. The order grants temporary, conditional exemptive relief so certain venues can trade tokenized National Market System stock. It does not approve, license, or endorse DeFiConnect.
Two temporary exemptions
The relief has two parts, both temporary and conditional. A tokenized-securities venue that meets the order’s conditions is exempt from the Exchange Act definition of “exchange” when it trades tokenized NMS stock through permissioned automated market makers and liquidity pools. A liquidity provider in such a pool who supplies tokenized NMS stock with proprietary capital, and who may also quote prices to customers or agree to provide committed capital, can receive a separate exemption from the definition of “dealer.” On the order’s face, that liquidity provider acts for its own account and must not hold or custody customer assets.
The press release describes some of the conditions. They include limits on the number of symbols and on volume; a requirement that the venue verify that holders of the tokenized stock have the same rights and privileges as holders of the equivalent traditional NMS stock; written notice to the issuer, and an opportunity to object, before an unaffiliated third party’s tokenization is made available; smart contracts that are auditable and public and deployed on a public, permissionless distributed ledger; a halt in the tokenized stock concurrently with a halt in the underlying stock on the primary listing exchange; and public notice of the venue’s operations, its trading, and its affiliates’ trading. That is not the full condition list. The order runs from September 17, 2026, until September 17, 2031. The Commission asked for comment.
Chairman Paul S. Atkins said the exemption, “while temporary, would allow TSVs to trade tokenized NMS stock in a permissioned environment today while the Commission considers the need for additional action to facilitate onchain trading.” Jamie Selway, Director of the Division of Trading and Markets, said that approval of the exemptive relief “marks an important milestone for the Commission’s work to open our capital markets for tokenized securities,” and that the division “stands ready to work with interested parties seeking to operate a TSV.”
What may be paired
The order, not the press release, says a venue may make available only tokenized NMS stock paired with another tokenized NMS stock, a non-security crypto asset such as a payment stablecoin issued by a permitted payment stablecoin issuer, or a tokenized money market fund. The non-stock leg has to be directly paired with the tokenized NMS stock. That pairing language is a limit on what the venue may list. It is not, on its face, an exemption for the firm that issues, redeems, or transmits the paired asset. Whether any person has other authority is a question for that firm and its counsel.
The operating model
The exemption is temporary, conditional relief for venues and for certain proprietary liquidity providers. It is not, by itself, an operating model for a licensed money transmitter, MSB, or fintech. A firm that permissions customers, handles a stablecoin or fiat leg, stops trading when the listing exchange stops, or records a tokenized position still has to decide, with its own counsel, who may act, what it treats as customer funds, when title moves, which record is the book, and what happens when trading stops. DeFiConnect does not make those determinations. We also do not advise a firm that it qualifies for this relief.
The founder previously did treasury operating work on a tokenized position at a prior employer. That work was the prior employer’s, not DeFiConnect’s. It was not done under the Innovation Exemption, and it is not an example of a tokenized-securities venue or of liquidity provision under the order. It is not an endorsement. It is not an offer or advice to buy, hold, or sell any token. DeFiConnect does not buy, hold, or sell tokens and does not place the trade.
DeFiConnect helps a licensed money transmitter, MSB, or fintech design, implement, run, and transfer its own model. We do not operate a venue or supply liquidity. We do not transmit or custody client funds. We are not a tokenized-securities venue, an exchange, an alternative trading system, a broker-dealer, a dealer, or a liquidity provider. The Innovation Exemption does not apply to DeFiConnect. The Commission has not approved, licensed, or endorsed us.
Where a tokenized position and a stablecoin or fiat leg can move on different clocks, we produce cash-flow maps of timing, accounts, systems of record, failure points, and the firm’s own stated treatment of the position. We do not determine legal title. We do not hold or move the assets.
We inventory the firm’s controls and write procedures for who may be permissioned, how wallets are funded and withdrawn, how dual control works, and how halts and incidents are handled. We run that calendar with the firm until its team takes it over. The controls stay the firm’s.
We specify subledger and general-ledger requirements so onchain activity, omnibus positions, and fees the firm records can reconcile into the books, plus a management balance-sheet memo. That memo is not a legal or audit opinion.
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DeFiConnect is not a licensed money transmitter. We do not custody or transmit client funds, do not act as BSA Officer, MLRO, CFO, Controller, or NMLS qualified individual, and do not give legal or audit opinions or guarantee regulatory outcomes.
This post is a summary, not the order. It is not legal advice, not a statement that any person qualifies for the Innovation Exemption, and not an offer to qualify a firm as a venue or liquidity provider. The exemption is the SEC’s, on the SEC’s conditions, and it does not apply to DeFiConnect.