- The SEC proposed removing two rules — Rule 611 and Rule 610(e) — that made automated market makers structurally incompatible with tokenized US stock trading.
- Galaxy’s Alex Thorn says the move is “one of the biggest unlocks yet” for tokenized equities in DeFi, as AMMs currently violate these rules with nearly every trade.
- The SEC is expected to replace the old rules with a “best execution” framework and is accepting public comment for 60 days before finalizing any changes.
The US Securities and Exchange Commission is weighing a regulatory change that could open the door for tokenized US stocks to trade freely on decentralized platforms — a shift that crypto analysts say has been years in the making.
The agency proposed scrapping two longstanding rules from its national market system framework: one that prohibits executing a stock trade at a worse price than available on another exchange, and another that bars exchanges from displaying a quote that undercuts prices listed elsewhere. On their own, the proposals might seem like routine regulatory housekeeping. For the tokenized asset industry, they could be anything but.
Why These Rules Were a Problem for DeFi
Decentralized trading platforms operate differently from traditional stock exchanges. Rather than matching buyers and sellers in real time, automated market makers — or AMMs — set prices algorithmically based on pooled liquidity. Traders execute against whatever the pool offers at that moment, with no mechanism to pause a transaction if a better price exists on another platform.
That’s precisely what the existing rules require. Under the current framework, any AMM handling tokenized stocks would be violating trade-through protections with virtually every transaction. Alex Thorn, head of research at Galaxy, put it bluntly: a tokenized stock pool operating under today’s rules would be “an illegal trading center.”
The pricing volatility inherent to AMMs compounds the problem. Pool prices shift constantly, meaning they would also be in near-perpetual conflict with rules designed to guarantee investors access to the best available quote across markets.
What the SEC Is Proposing — and What Comes Next
Rather than simply removing the old rules, the SEC is expected to replace them with a “best execution” standard — a broader, more flexible requirement that focuses on overall trade quality rather than strict price matching across venues. Thorn says this kind of framework could realistically accommodate how AMMs function.
The proposal is open for public comment for 60 days. The SEC will review responses before finalizing any changes, leaving room for revision based on industry feedback.
This isn’t the agency’s first move toward crypto-friendly regulation. In August 2025, the SEC launched Project Crypto, an initiative aimed at updating its rules to account for digital assets and blockchain technology in US financial markets. The tokenized stock proposal fits squarely within that broader effort.
A Bigger Picture Shift
The timing matters. Just last month, the SEC was reportedly on the verge of publishing a separate framework to allow tokenized stock trading — only to pull back after traditional stock exchanges raised objections about implementation. Thursday’s proposal sidesteps that friction by attacking the structural problem directly: the rules that made DeFi-based equity trading legally untenable in the first place.
Thorn called the proposal “one of the biggest unlocks yet for tokenized stocks,” and it’s hard to argue with that framing. If finalized, it would remove one of the last major legal obstacles standing between Wall Street equities and decentralized finance.
The SEC’s proposal won’t immediately put Apple shares on a DeFi protocol. But it signals something significant: regulators are no longer treating decentralized market infrastructure as a footnote. By rethinking rules that were written long before blockchain existed, the agency is quietly building the legal foundation for a market that looks very different from the one we have today.
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