SEC Proposes Market Rule Changes That Could Enable Tokenized U.S. Stocks on DeFi Platforms

The U.S. Securities and Exchange Commission (SEC) has proposed scrapping two long-standing equity market rules that analysts say have hindered blockchain-based trading systems and the development of tokenized U.S. stocks. Galaxy Digital Head of Research Alex Thorn said the move could remove key regulatory roadblocks that currently keep automated market makers (AMMs) and decentralized exchanges from supporting tokenized U.S. equities. He described the proposal as one of the most significant developments so far for tokenized stocks. The SEC's proposal targets two provisions within the National Market System framework. The first is Rule 611, which bans so-called "trade-throughs" by requiring orders to be executed at the best available price across all exchanges. The second is Rule 610(e), which restricts exchanges from displaying quotes that are equal to or worse than prices already available elsewhere in the market. Thorn argued that these market-structure requirements do not align with how AMMs function. Unlike traditional order books, AMMs commonly used in decentralized exchanges price assets via liquidity pools. Trades execute at the pool price even if a better quote exists on another venue, and AMMs generally cannot continuously check and route orders to the best price across all platforms. That mismatch, he said, means an AMM offering tokenized stocks could repeatedly run afoul of trade-through rules under the current regime. Constantly shifting pool prices may also conflict with quote-display requirements intended to ensure investors see the best available prices. Thorn expects the SEC could ultimately replace the existing approach with a broader "best execution" standard, potentially giving decentralized trading models more flexibility while maintaining investor protections. The proposal is part of the SEC's broader effort to modernize market regulation and address emerging blockchain technologies. The agency launched Project Crypto in 2025 to develop clearer rules for digital assets and blockchain-based financial infrastructure. The SEC has opened a 60-day public comment period before making a final decision.