SEC Staff Maps Tokenization Models: Tokenized Securities are Still Securities; Models Matter

Introduction

On January 28, 2026, staff from the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets (the “Staff”) jointly issued a statement providing guidance on the application of the federal securities laws to tokenized securities (the “Statement”).¹ The Statement describes a taxonomy for tokenized securities and states the Staff’s position that the federal securities laws apply to tokenized securities to the same extent as their traditional counterparts, regardless of format. The Statement seeks to provide market participants with a degree of regulatory clarity as tokenization continues to gain traction across the securities and commodities markets.

The pace and scale of tokenization initiatives have accelerated recently, due in part to a more favorable regulatory environment for digital assets, the potential for timing and process efficiencies in blockchain technology, and evolving investor preferences. For example, staff of the SEC’s Division of Trading and Markets issued no-action relief to the Depository Trust Company for their pilot tokenization program, while Nasdaq and the New York Stock Exchange have each proposed or announced plans to offer platforms for trading tokenized securities.² However, guidance from the SEC on tokenization of securities generally has been limited until the Statement.³ The Statement also follows reports regarding the issuance by third parties of tokenized securities, typically outside the U.S., some of which have already attracted attention from regulators.⁴

The Statement arrives at a key moment of regulatory coordination on digital assets more broadly. In a recent speech, CFTC Chairman Michael S. Selig, who was until recently the chief counsel to the SEC’s Crypto Task Force, announced that the CFTC is partnering with the SEC on “Project Crypto,” an initiative introduced by SEC Chair Paul Atkins in July 2025 to establish clear jurisdictional lines, advance a common crypto asset taxonomy, and reduce regulatory fragmentation and duplicative administrative requirements.⁵ Chairman Selig’s announcement follows guidance and no-action relief from the CFTC facilitating the use of tokenized assets as collateral for futures and swaps transactions, subject to certain conditions.⁶ SEC Chair Paul Atkins has also outlined an ambitious regulatory agenda for 2026, including the much-discussed “innovation exemption” to “facilitate limited trading of certain tokenized securities on novel platforms with an eye toward developing a long-term regulatory framework.”⁷

While the Statement does not alter existing law, it provides a valuable framework for understanding how tokenized securities fit within the current regulatory regime and signals the Staff's commitment to facilitating innovation while maintaining investor protection. Perhaps most importantly, it provides an insight into how the Staff views tokenization, as well as the regulatory issues that market participants engaged in tokenization might consider.

Towards a Tokenization Taxonomy

In the Statement, the Staff define a tokenized security as a financial instrument enumerated in the definition of “security” under the federal securities laws that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.⁸ The Statement then distinguishes between securities tokenized by the issuer (or its agent) and securities tokenized by a third-party.

1. Issuer-Sponsored Tokenized Securities

The Statement describes two methods that the Staff has observed issuers (or their agents) using to tokenize securities:

• Integration Method: By issuing a security in the format of a crypto asset: When an issuer issues a security formatted as a crypto asset, the issuer (or its agent) integrates distributed ledger technology into the “master securityholder file” used to record owners of the security.⁹ Under this tokenization method, a transfer of the crypto asset on the crypto network results in a transfer of the security on the master securityholder file. Unlike securities issued in a more traditional format, the master securityholder file for such crypto asset securities is maintained by the issuer (or its agent) on one or more crypto networks (rather than, for example, in traditional book entry). Importantly, the Statement acknowledges that issuers that use this tokenization method can continue to maintain certain records “offchain.” That is, the issuer (or its agent) uses “onchain” database records alongside offchain database records and associates the onchain information (e.g., wallet address, quantity of security owned, and issue date) with relevant offchain information (e.g., securityholder name and address).
• Notification Method: By issuing a security in a more traditional format alongside a crypto asset, with the crypto asset notifying the issuer (or its agent) to record transfers of ownership on the master securityholder file: Under this tokenization method, the issuer issues the security offchain (i.e., in traditional book entry) and issues a corresponding crypto asset to security holders. The crypto asset does not convey any rights, obligations, or benefits of the security. Instead, the transfer of the crypto asset operates to notify the issuer (or its agent) to record the transfer of ownership of the security on the offchain master securityholder file. That is, the issuer (or its agent) will use the onchain database records (i.e., the blockchain-based records) to update its traditional offchain database records to record the transfer of ownership of the security.

2. Third-Party Tokenized Securities

The Statement also recognizes that a third-party unaffiliated with an issuer can tokenize the issuer’s securities. In the Staff’s view, such third-party issuances of tokenized securities may—or may not—represent the issuance of a separate security and may—or may not—impact the rights and privileges that are conveyed to token holders. The Statement describes two forms of third-party tokenization models: “custodial” or “synthetic” tokenized securities.

• Custodial Model: In the custodial model, a third-party creates a crypto asset that operates as a “tokenized security entitlement” by conveying an indirect interest in an underlying security legally owned by the third party. The underlying security is held in custody, and the crypto asset evidences the holder’s direct or indirect ownership interest in the underlying security being held in custody. Similar to issuer-sponsored tokenized securities, the third-party issuer of a “custodial” tokenized security may use a blockchain as its master securityholder file or maintain traditional books and records with a blockchain overlay as a mirror record of share ownership.¹⁰
• Synthetic Model: In the synthetic model, a third-party may issue a tokenized “linked security” that provides synthetic exposure to an underlying security issued by an unaffiliated entity. Under this tokenization model, the crypto asset (i.e., the tokenized security) tracks the underlying reference asset’s value, but does not convey ownership or legal rights to the underlying security and only represents a claim against the third-party not directly tied to the reference asset.¹¹ Under certain circumstances, as discussed below, a linked security may be a security-based swap.  

Regulatory and Other Considerations

The Statement seeks to provide regulatory clarity around prominent issues relating to tokenization, and accordingly it raises several regulatory issues, including those outlined below:

Tokenized Securities as Security-Based Swaps

The Statement notes that certain tokenized-linked securities issued by third-parties may constitute security-based swaps.¹² When a third-party issues a tokenized-linked security that falls within the definition of a swap and it satisfies one of the three statutory criteria for a security-based swap, the tokenized security will be regulated as a security-based swap under the Exchange Act. A third party may not offer or sell a crypto asset representing a security-based swap to persons who are not “eligible contract participants” unless a registration statement filed under the Securities Act of 1933 (the “Securities Act”) is in effect for the token (unless exempt), and the transactions in the token are effected on a national securities exchange.

The Statement notes that whether a financial instrument is a security-based swap depends partially on exclusions from the definition of “swap” in Section 1a(47)(B) of the Commodity Exchange Act (the “CEA”).¹³ Even a financial instrument that meets one of the three statutory criteria for a security-based swap under the Exchange Act may fall within one of the exclusions from the CEA definition of a “swap” relating to securities. 

For example, any note, bond, or evidence of indebtedness that is a security, as defined in Section 2(a)(1) of the Securities Act, is excluded from the definition of swap, as is any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities. To the extent a financial instrument defined as a security under the Exchange Act meets one of these exclusions, it is excluded under the CEA swap definition.

The Staff further clarifies that exclusions should be assessed by “the economic reality of the instrument rather than the name given to the instrument.” Third parties tokenizing securities, particularly those issuing tokenized securities that provide synthetic exposure to an underlying security, must therefore closely consider whether the tokenized security is, in fact, a security-based swap.

Multi-Class Considerations Under the 1940 Act

The Staff notes that although a single class of securities may be issued in multiple formats, including both in tokenized and traditional forms, and in tokenized form on different crypto networks, this may raise questions as to whether (and when) a security issued in a different format effectively constitutes a separate class.¹⁴ For an issuer registered under the 1940 Act, such tokenization could raise multi-class issues under Section 18 of the 1940 Act.

Section 18 of the 1940 Act generally prohibits registered investment companies from issuing “senior securities” (e.g., a class of debt or of stock having priority over another with respect to the distribution of assets or payment of dividends).¹⁵ This note in the Statement appears to serve as a reminder to registered fund issuers that, when issuing securities in both traditional and tokenized formats, shareholders in one format should not be granted or effectively obtain a priority claim on fund assets over shareholders in the other format. Similarly, to the extent a tokenized security is issued on multiple blockchains, shareholders on one blockchain should not be granted or effectively obtain a priority claim over shareholders on another blockchain.

State Law Compliance and UCC Article 8

In defining a tokenized security, the Staff assumes that such securities are not subject to any restriction on transfer imposed by the issuer and are properly issued and transferred under applicable state law.¹⁶ For example, the Statement assumes that a transfer of the crypto asset results in a transfer of control of the security or security entitlement, or ownership of the security or security entitlement, via an effective indorsement, instruction, or entitlement order under Article 8 of the Uniform Commercial Code (“UCC”).

Article 8 of the UCC establishes the framework for how securities are held and transferred, including concepts like “control” of security entitlements and the requirements for effective instructions and entitlement orders.¹⁷ The Statement does not address the interaction between Article 8 and new Article 12 of the UCC for “controllable electronic records.”¹⁸

Conclusion

The Statement provides a useful taxonomy for analyzing tokenized securities and confirms that the federal securities laws apply regardless of the format in which a security is issued. The taxonomy also highlights that the specific method used to tokenize a security matters, given that different tokenization models may impact the rights and privileges that are conveyed to token holders and may result in the issuance of a separate security that is subject to a specific regulatory framework. These differences may have downstream consequences, including to the tax treatment and withholding consequences to owning the tokenized security.

The taxonomy also provides a valuable lens through which to analyze recent regulatory and market developments, such as the DTC tokenization pilot program, the Nasdaq and NYSE proposals to offer platforms for trading tokenized securities, and the CFTC’s recent guidance on tokenized collateral.