Coinbase and Robinhood Face Global Pushback Over Tokenized Stock Offerings

• The World Federation of Exchanges has warned the SEC that tokenized stocks mislead investors.
• The letter comes as platforms like Coinbase and Robinhood expand their tokenized equity offerings.
• The WFE demands that regulators apply existing securities laws to all tokenized stock products.

Global stock exchanges are pressing regulators to act against tokenized equities, warning that the products risk misleading investors and damaging trust in financial markets.

The World Federation of Exchanges (WFE), an industry body that represents the world’s top exchanges and clearing houses, sent a formal letter to the U.S. Securities and Exchange Commission’s (SEC) Crypto Task Force, the European Securities and Markets Authority (ESMA), and IOSCO’s Fintech Task Force.

What Is the WFE’s Core Complaint Against Tokenized Stocks?

In the letter, the WFE said tokenized stocks “mimic” traditional equities but do not provide the same rights or protections. 

“We are alarmed at the plethora of brokers and crypto-trading platforms offering or intending to offer so-called tokenized U.S. stocks,” the group wrote. It stressed that such products are marketed as stock equivalents when they are not.

The WFE added that issuing companies could face reputational damage if tokenized versions of their shares fail or mislead investors.

Why Are Coinbase and Robinhood Pushing Ahead?

Even as regulators review the risks, trading platforms are expanding into the space. Robinhood launched tokenized equities for EU customers in June and announced plans to offer tokens linked to private companies, including OpenAI. 

The platform’s aggressive expansion, which included a 2% incentive that triggered massive ETH unstaking, shows its commitment to alternative products. Meanwhile, Coinbase is actively seeking SEC permission to provide tokenized equities to its US customers.

Neither company has commented publicly on the WFE’s letter. The SEC and IOSCO did not immediately respond to Reuters for comment, while ESMA declined. However, a sitting SEC commissioner stated in July that any tokenized securities must comply with existing regulations.

What Specific Actions Are Regulators Being Asked to Take?

The WFE urged regulators to take three specific actions: apply existing securities laws rigorously to all tokenized assets, clarify the rules on ownership and custody, and restrict any marketing that equates these tokens with actual stocks.

The push for clear rules comes as some regulators are exploring new frameworks, with one SEC Commissioner proposing a US-UK crypto sandbox for tokenized asset innovation.

How Big Is the Tokenized Stock Market?

The market for tokenized assets has already passed $26 billion, according to industry data. Tokenized stocks make up only a portion of that total but are drawing attention as major platforms experiment with new offerings.

Proponents of tokenized equities argue that they reduce trading costs, speed up settlement and allow trading outside of market hours. But regulators remain cautious about whether these products align with existing securities frameworks.