The U.S. Securities and Exchange Commission (SEC) has issued important guidance regarding the application of federal securities laws to tokenized securities. On January 28, 2026, SEC staff released a joint statement aimed at clarifying the categorization of these crypto assets, which are becoming increasingly popular among market participants. This guidance is expected to assist entities in complying with existing securities regulations and in preparing necessary documentation for registration or submission.
The SEC’s statement delineates tokenized securities into two primary categories: **issuer-sponsored tokenized securities** and **third-party sponsored tokenized securities**. Issuer-sponsored tokenized securities are those that are tokenized by or on behalf of the original issuers, while third-party sponsored tokenized securities are created by unaffiliated third parties. This distinction is crucial for understanding how federal regulations apply to these financial instruments.
Understanding Tokenized Securities
The SEC emphasizes that tokenized securities can take various forms. Issuer-sponsored tokenized securities may either represent the same class of security as issued off-chain or on-chain, or they may constitute a distinct class altogether. For instance, an issuer might create a tokenized security that exists as a digital asset represented through distributed ledger technology. In this scenario, the issuer can maintain its master securityholder file on one or more crypto networks, supplementing or replacing traditional off-chain records.
Alternatively, an issuer may opt to issue a security using a conventional master securityholder file while simultaneously providing a crypto asset to the security holder. In this case, the transfer of the crypto asset serves as a notification for the issuer or its transfer agent, prompting the update of ownership records.
Despite the diverse formats of these securities, the SEC affirms that the application of federal securities laws remains consistent. Each tokenized security must either be registered or qualify for an exemption from registration.
Third-Party Sponsored Models
Third-party sponsored tokenized securities can be categorized as either **custodial tokenized securities** or **synthetic tokenized securities**. In the custodial model, a third party issues a crypto asset that represents an underlying security, often referred to as a tokenized security entitlement. Entities such as clearing agencies may facilitate the recording of security entitlements using distributed ledger technology, which offers an alternative to traditional centralized ledgers.
The synthetic model presents a different approach, where a tokenized security may serve as a crypto asset that provides synthetic exposure to an underlying security. This linked security is issued by a third party and offers exposure to the underlying reference security, although it does not constitute an obligation of the issuer of that referenced security. Examples of linked securities include debt securities, such as structured notes, as well as equity securities, like exchangeable stock. In certain instances, a linked security may be categorized as a “security-based swap.”
The SEC has made it clear that the economic realities of these synthetic products are what determine the applicable regulations, rather than the terminology used to describe them. This is particularly relevant in assessing the regulation of security-based swaps and linked securities.
To ensure compliance, the SEC mandates that third parties must not offer or sell crypto assets representing security-based swaps to individuals who do not meet the criteria of eligible contract participants, unless a Securities Act registration statement is in effect. Transactions involving these crypto assets should ideally occur on a national securities exchange.
The joint statement was issued by the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets. This new framework for tokenized securities represents the first installment in an anticipated series of guidelines and proposed rulemaking aimed at clarifying the regulation of crypto assets. SEC Chairman Paul Atkins has indicated that addressing these issues will be a high priority during his tenure.
With this guidance, the SEC aims to foster a more transparent and compliant environment for the evolving landscape of tokenized securities. The implications of this directive are significant for market participants as they navigate the complexities of federal securities laws in relation to digital assets.
