The staff of the U.S. Securities and Exchange Commission (SEC) issued a significant joint statement on January 28, 2026, aimed at clarifying how federal securities laws apply to what are known as tokenized securities. This guidance is intended to assist market participants in understanding the regulatory landscape surrounding these crypto assets and in preparing necessary documentation for compliance.
The SEC’s statement categorizes tokenized securities into two main groups: issuer-sponsored tokenized securities and third-party sponsored tokenized securities. Issuer-sponsored tokenized securities are those tokenized by or on behalf of the original issuers, while third-party sponsored tokenized securities are created by unaffiliated entities. This classification is crucial for market participants as it helps delineate responsibilities and regulatory requirements based on the type of tokenized security being dealt with.
For issuer-sponsored tokenized securities, the guidance outlines that these may be issued in various formats. They can either represent the same class of security as an off-chain asset or exist as a separate class entirely. An example provided by the SEC illustrates how a tokenized security might be issued electronically as a crypto asset through distributed ledger technology. In this instance, the issuer maintains a master securityholder file on one or more crypto networks, supplementing or replacing traditional off-chain records.
Conversely, an issuer might opt to issue a security off-chain while simultaneously providing a crypto asset to the security holder. In such cases, the transfer of the crypto asset alerts the issuer or its transfer agent to update ownership records accordingly. Regardless of the format, compliance with federal securities laws remains mandatory, necessitating either the registration of the token security or an exemption from such registration.
The SEC also detailed the characteristics of third-party sponsored tokenized securities. These can be categorized further into custodial tokenized securities and synthetic tokenized securities. In the custodial model, a third party issues a crypto asset that represents the underlying security, enabling financial market participants to use distributed ledger technology for recording security entitlements.
The synthetic model presents another layer of complexity. Here, a tokenized security may represent a crypto asset that provides synthetic exposure to an underlying security. This linked security, which can take the form of either a debt or equity instrument, is created by a third party and is not an obligation of the original issuer. Notably, the SEC emphasized that the economic realities of these synthetic products are what determine their regulatory classification, rather than the terminology used to label them.
In particular, the third-party-created security-based swaps, which offer synthetic exposure to either a referenced security or certain events associated with that security, are subject to stringent requirements. The SEC stipulates that these crypto assets may not be offered to individuals who do not qualify as eligible contract participants without a valid registration statement in place.
The joint statement was released by the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets. This guidance marks the initial step in what is expected to be a series of regulatory clarifications regarding crypto asset regulation. SEC Chairman Paul Atkins has identified this initiative as a high priority during his tenure, indicating a commitment to providing clearer rules for market participants navigating the rapidly evolving landscape of tokenized securities.
Through this statement, the SEC aims to foster a better understanding of tokenized securities, ensuring that participants can operate within the legal frameworks designed to protect investors and maintain orderly markets.
