The rule that kept tokenized stocks out of DeFi wasn't about crypto at all—it was a 20-year-old equity market speed bump the SEC just decided to remove.
The Summary
- The SEC proposed scrapping Rules 611 and 610(e) of Regulation NMS, the trade-through rule that's governed US equity markets since 2005
- Galaxy Digital's Alex Thorn calls this "one of the biggest structural barriers" to tokenized US equities trading in DeFi
- The change would allow DeFi automated market makers to trade tokenized US stocks at scale without violating legacy market structure rules
- This isn't crypto regulation—it's the SEC admitting a rule built for high-frequency trading in 2005 makes no sense for on-chain markets in 2026
The Signal
Rule 611, the trade-through rule, requires that any trade of a stock must execute at the best available price across all exchanges. Sounds reasonable until you try to build a decentralized market for tokenized Apple or Tesla shares. The rule was designed to prevent brokers from routing orders to exchanges offering worse prices, but it assumes a traditional market structure with centralized order books and microsecond execution times.
DeFi doesn't work that way. Automated market makers use liquidity pools, not order books. Prices emerge from algorithms and pool ratios, not bid-ask spreads on centralized venues. If you tokenize a share of Goldman Sachs and put it in a Uniswap pool, you're not "routing" an order anywhere. You're swapping against a smart contract. Rule 611 didn't account for this, so it effectively blocked tokenized equities from scaling in DeFi markets.
"This would remove barriers that prevented DeFi automated market makers from trading tokenized US equities at scale."
Galaxy's Thorn sees this proposal as a major unlock. Tokenized stocks have been stuck in proof-of-concept mode partly because the regulatory framework assumed all trading happens on traditional venues. You could tokenize the stock, but you couldn't build liquid markets for it on-chain without running into NMS conflicts. The SEC's move signals they're willing to rethink market structure rules that predate smartphones, let alone smart contracts.
This isn't just about crypto. The SEC is acknowledging that market structure rules written for one technological era don't automatically apply to another. Rule 611 made sense when the biggest concern was high-frequency traders gaming latency between the NYSE and NASDAQ. It makes less sense when the "exchange" is a liquidity pool governed by code, accessible 24/7, and settled on a blockchain.
The Implication
If this goes through, expect tokenized equity platforms to move fast. We're talking about real-time settlement, fractional ownership, and composability with DeFi protocols—things traditional equities can't touch. Companies like Backed, Ondo, and others building on-chain securities infrastructure just got a green light to scale in the US market. For traders, this means access to US stocks around the clock with blockchain-level settlement speed. For the SEC, it's a test case: can they regulate markets that don't look like markets used to look. Watch how they handle the next layer—custody, investor protection, and what happens when tokenized shares start moving through DeFi protocols at volume.