SEC Staff Guidance on Tokenized Securities: Practical Takeaways for Founders and Investors

On January 28, 2026, SEC staff from the divisions of Corporation Finance, Investment Management, and Trading and Markets released guidance addressing the regulatory treatment of tokenized securities. While framed as a taxonomy, the guidance has immediate consequences for how tokenized equity products can be structured, who they can be offered to and which business models are likely to work under current law. The joint statement is notable also in that it reflects unusually broad staff coordination across issuance, fund regulation and market structure.

The analysis turns largely on whether a token represents actual ownership of a security or provides only economic exposure. That distinction drives whether a product is treated as a traditional security, a security entitlement or a derivative, and it determines the applicable registration, trading and distribution requirements.

Below is a practical breakdown for investors and founders of how the guidance applies to the models we are seeing most often.

Issuer-Sponsored Tokenization

Issuer-sponsored tokenization covers structures where a company tokenizes its own securities. The token represents the same legal interest as the underlying equity or debt, and holders receive the full set of rights associated with ownership, including voting and dividends where applicable.

From the SEC’s perspective, this is a conventional securities issuance using a different recordkeeping mechanism. The SEC identifies two distinct models for issuer-sponsored tokenization. Under the first, the issuer (or its agent) integrates distributed ledger technology directly into the master securityholder file, so that onchain records constitute the authoritative ownership record. Under the second, the issuer issues the security offchain and issues a separate crypto asset that is used to notify the issuer to update the offchain master securityholder file. In this model, the crypto asset itself does not convey rights or benefits of the security. The distinction matters because it affects where the authoritative record of ownership sits, how transfers are legally effected, and the degree to which onchain activity constitutes a securities transaction.

The compliance implications are straightforward:

• Securities Act registration or a valid exemption is still required;
• Exchange Act obligations, including transfer agent and recordkeeping requirements, continue to apply; and
• Issuers must address state corporate law issues, including whether tokenized and non-tokenized securities are the same class and how transfers are legally effected.

Notably, the guidance highlights that if a tokenized security is of substantially similar character to a security issued in traditional format and confers substantially similar rights and privileges, the two may be considered the same class for purposes of Sections 12(g)(5) and 15(d)(1) of the Exchange Act. This has direct implications for whether tokenization triggers Exchange Act reporting obligations.

The guidance makes clear that tokenization does not alter the substantive regulatory analysis. For issuers willing to do the work on transfer mechanics and infrastructure integration, this path is viable.

Third-Party Tokenization

The guidance draws a clear distinction between issuer-led models and tokenization conducted by third parties that are not the issuer of the referenced security. These third-party models generally fall into two categories.

Custodial Models

In custodial structures, a third party holds the underlying securities and issues tokens representing interests in those holdings. Token holders typically have a security entitlement rather than direct ownership.

This model fits within existing custody and clearing frameworks, but it introduces familiar risks that need to be addressed explicitly:

• Custodian credit and insolvency risk
• Operational controls and segregation of assets
• Disclosure around the nature and limits of the holder’s rights

The guidance does not prohibit these structures, but it treats them as custody businesses, not as issuer-level ownership.

Synthetic Exposure Models

Synthetic models provide economic exposure to a security without conferring ownership rights. The token issuer is not the underlying company, and token holders do not receive voting rights, dividends or direct claims against the issuer.

The staff identifies two common forms:

• Structured or linked securities issued by the platform; and
• Security-based swaps referencing a single security or narrow-based index.

These products are analyzed as derivatives rather than tokenized securities of the underlying issuer.

Retail Distribution Constraints for Synthetic Products

The most commercially relevant portion of the guidance concerns retail distribution of security-based swaps.

Where a tokenized product is classified as a security-based swap, retail sales are permitted only if:

1. The product is registered under the Securities Act; and
2. Transactions occur on a national securities exchange.

Both conditions must be satisfied. Today, there is no established national exchange infrastructure for tokenized security-based swaps, and registration of these products presents meaningful legal and operational challenges.

As a result, third-party tokens that provide only price exposure to individual equities face significant barriers to retail distribution under current conditions. This is consistent with how similar products are treated outside the tokenization context.

Importantly, these retail constraints do not apply to transactions among eligible contract participants. The guidance confirms that ECPs may trade tokenized security-based swaps bilaterally or on a security-based swap execution facility without national securities exchange listing. For institutional onchain interest, this pathway may be currently viable.

Structured Notes

The guidance acknowledges that certain notes and other debt instruments may fall outside the statutory definition of a security-based swap. That observation should not be overstated.

These instruments remain subject to the Securities Act and the regulatory framework governing structured products, including registration or exemption analysis, disclosure obligations and distribution constraints. This is an alternative compliance framework, not a lighter one.

Investment Company Act Considerations

The guidance also flags two Investment Company Act (ICA) concerns. First, an issuer subject to the ICA that issues securities in multiple formats, including tokenized format on different blockchain networks, may raise multi-class prohibition issues under Section 18. Second, a third party using a synthetic tokenization model could, depending on facts and circumstances, be deemed an investment company. Both issues are significant for registered funds considering tokenized share classes and for platforms building synthetic tokenization products.

Practical Implications

For Companies Building Tokenization Infrastructure

Retail-facing synthetic products referencing individual securities present meaningful regulatory risk. Companies pursuing third-party models should be clear about whether their products involve ownership, security entitlements or derivatives and should align distribution accordingly.

Issuer-sponsored tokenization and custodial models fit more cleanly within existing frameworks. Synthetic exposure products are more likely to be viable in institutional markets limited to eligible contract participants.

For Issuers Considering Tokenization

The guidance confirms that issuers can pursue tokenization within existing securities law regimes. Key execution issues include transfer agent integration, classification of tokenized securities and alignment with state corporate law requirements.

For Investors Evaluating Tokenization Businesses

From a diligence perspective, the first questions are structural:

• Does the token convey ownership or only economic exposure?
• Is the product intended for retail users, and if so, how does it address security-based swap constraints?
• Who bears custody risk, and how is it managed?
• Does the blockchain component provide operational value or primarily serve a distribution or branding function?

Regulatory Context

The guidance was released alongside broader coordination and harmonization efforts between the SEC and the CFTC, including the recently announced Project Crypto initiative. These efforts point toward more consistent treatment of digital asset products across securities and derivatives regimes.

Takeaways

Issuer-sponsored tokenization and custodial structures remain workable within established regulatory frameworks. Synthetic exposure models face material limitations in retail contexts absent registered exchange trading and full Securities Act compliance.

Tokenization efforts that are designed with these constraints in mind are more likely to be commercially sustainable.