On Dec. 2, Citadel Securities filed a 13-page letter with the SEC arguing that decentralized protocols facilitating tokenized US equity trading already meet statutory definitions of exchanges and broker-dealers, and regulators should treat them accordingly.
Two days later, the SEC’s Investor Advisory Committee convened a panel on tokenized equities that made clear the question is no longer whether stocks can move on-chain, but whether they can do so without dismantling the permissionless architecture that built DeFi.
The gap between those two positions now defines the most consequential regulatory fight in crypto since the Howey test debates.
Citadel’s letter arrived at the moment when tokenized equities stopped being a thought experiment. The firm welcomes tokenization in principle but insists that realizing its benefits requires applying “the key bedrock principles and investor protections that underpin the fairness, efficiency, and resiliency of US equity markets.”
In other words, the document suggests that companies seeking to trade tokenized Apple shares must comply with Nasdaq rules, including transparent fees, consolidated tape reporting, market surveillance, fair access, and registration as an exchange or broker-dealer.
The filing warns that granting broad exemptive relief to DeFi platforms creates a shadow US equity market in which liquidity fragments, retail investors lose Exchange Act protections, and incumbents face regulatory arbitrage from unregistered competitors.
Within hours, Uniswap founder Hayden Adams fired back on X, calling Citadel’s position an attempt to “treat software developers of decentralized protocols like centralized intermediaries.”
He invoked ConstitutionDAO, the 2021 crowdfunding effort that pooled $47 million in Ethereum to bid on a first-edition Constitution at Sotheby’s, only to lose to Griffin’s $43.2 million bid.
Additionally, Adams zeroed in on Citadel’s fair-access argument, calling it “actual nerve” from the dominant player in retail order flow. The exchange captured crypto’s core narrative of permissionless code versus gatekeeper control and set the terms for the Dec. 4 panel.
The statutory box citadel wants to close
Citadel walks through the Exchange Act’s definitions to make its case. An exchange is “any organization, association, or group of persons” that “provides a market place or facilities for bringing together purchasers and sellers of securities.”
Rule 3b-16 clarifies that a system operates as an exchange if it brings together orders using established, non-discretionary methods and if buyers and sellers agree to trade.
Citadel argues many DeFi protocols meet all three prongs: there is a “group of persons” behind the protocol (founding designers, governance organizations, foundations), the protocol brings together buyers and sellers via non-discretionary code (automated market makers, on-chain order books), and users agree to trade when they submit transactions.
The same logic extends to broker-dealer status.
Citadel catalogs DeFi trading apps, wallet providers, AMMs, liquidity providers, searchers, validators, protocol developers, and smart contract developers.
For each, it lists transaction-based fees, governance-token rewards, or order-routing payments. The implication is that protocols that collect revenue tied to securities trading, even through code, must register.
That framing aligns with the SEC’s 2024 enforcement action against Rari Capital, which charged a DeFi lending protocol and its founders with acting as unregistered brokers. Citadel wants Rari to serve as the template.
The fair access requirement became the flashpoint. Exchanges and ATSs must apply objective criteria to all users, removing discrimination in who can trade and the fees they pay.
Citadel’s letter notes that there are “no equivalent requirements for unregistered DeFi trading systems, enabling them to limit access arbitrarily or preference certain members over others.”
Adams chose that paragraph for his screenshot, arguing that Citadel cannot credibly claim DeFi lacks fair access when the firm itself dominates retail order flow from brokers like Robinhood.
Armani Ferrante, founder of Backpack, added:
“‘DeFi’ is not well defined and so all of these conversations are an apples to oranges comparisons. There’s CEXs. Unregulated CEXs. DEXs. And unregulated CEXs pretending to be DEXs.”
What the Dec. 4 panel revealed
The SEC Investor Advisory Committee meeting framed tokenized equities within a mainstream market structure rather than treating them as a crypto novelty.
The panel, moderated by Andrew Park and John Gulliver, brought together representatives from Coinbase, BlackRock, Robinhood, Nasdaq, Citadel Securities, and Galaxy Digital.
The agenda tested how issuance, trading, clearing, settlement, and investor protections could work under existing rules, with an explicit focus on native issuance versus wrapper models, Regulation NMS applicability, interoperability across chains, and settlement and short-selling mechanics.
Commissioner Crenshaw delivered the skeptical case. She noted that many tokenized equity products marketed as wrapped exposure are not one-to-one replicas of the underlying shares, with ownership rights and entitlements that can be unclear or disconnected from issuers.
Additionally, she questioned whether relaxing requirements simply because a product sits on a blockchain invites regulatory arbitrage.
That framing dovetails with the agenda’s emphasis on distinguishing true equity-like rights from lookalike tokens.
Chairman Paul Atkins countered by pitching tokenization as a modernization project for US capital markets, arguing the Commission should enable markets to move on-chain while keeping US leadership in global finance.
Outside the meeting, incumbent resistance sharpened. The World Federation of Exchanges warned the SEC against broad relief that would let crypto firms sell tokenized stocks without the traditional regulatory perimeter.
SIFMA echoed a technology-neutral line, supporting innovation but arguing that tokenized securities should remain subject to core investor-protection and market-integrity rules and that any exemptions should be narrow.
Nasdaq’s earlier proposal to treat qualifying tokenized shares as fungible with traditional shares on the same order book, with the same CUSIP and the same material rights, aligns with the direction Atkins appears to favor.
Competing theories of control
Citadel’s theory holds that a security is a security, regardless of the ledger.
If you bring together buyers and sellers of Apple shares, even tokenized, using automated code and collecting fees, you perform exchange or broker-dealer functions and should meet those obligations.
This view treats code as infrastructure, not ideology. It assumes that investor protection flows from intermediary accountability rather than from technical design.
Adams’s theory treats open-source code as distinct from intermediaries. A smart contract does not have customers, does not take custody, does not exercise discretion, and does not fit the Exchange Act’s mid-20th-century model.
Treating protocol developers as brokers conflates writing software with operating a business and hands incumbents veto power over which technologies can exist.
This view assumes protection flows from transparency and permissionlessness: anyone can audit the code, fork it, or build competing infrastructure.
Commissioner Hester Peirce, who leads the SEC’s Crypto Task Force, has staked out a position closer to Adams.
In a February statement, she stated that ordinary DeFi front-end builders and open-source developers should not automatically be held to exchange and broker standards just for publishing code or running a non-custodial UI.
Yet Citadel’s letter explicitly lists “DeFi protocol developers” and “smart contract developers” as potential intermediaries who design, deploy, and maintain infrastructure while collecting fees for executing trades, exercising governance rights, and prioritizing network traffic.
If deploying a smart contract that lets users trade tokenized stocks makes someone a broker-dealer subject to net-capital rules, custody requirements, and know-your-customer obligations, then open-source protocol development becomes legally untenable.
What happens next
The signal for 2026 is that the SEC will test whether tokenized equities can exist inside the same investor-rights and market-integrity architecture that governs today’s equities.
Atkins has floated an innovation exemption, a supervised sandbox that would let some tokenized equity platforms operate without full registration while the agency studies the risks.
The Dec. 4 panel framed that exemption as a compliance stress test, not a blanket waiver.
The big unresolved fight is whether innovation pathways will be tightly tethered to Regulation NMS and existing intermediary obligations, or whether the SEC will entertain broader experimental carve-outs that TradFi groups fear could fragment liquidity and weaken protections.
If the SEC sides with Citadel, DeFi protocols handling tokenized equities face compliance burdens designed for Fidelity and Morgan Stanley, driving activity offshore or into gray-market wrappers.
If it sides with Adams, traditional participants will argue that the agency created regulatory arbitrage, and litigation from SIFMA and the World Federation of Exchanges will follow.
The outcome decides whether tokenized US equities can trade on public blockchains under the permissionless ethos that built DeFi, or whether opening the stock market to on-chain settlement means closing DeFi’s open architecture in America.
Griffin placed his bet. The SEC now chooses who gets the architecture.
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