The SEC's June 11 proposal to scrap Rule 611 of Regulation NMS does more than tidy up a 2005 relic. It removes the single biggest compliance barrier that has kept tokenized US equities from trading on-chain, and paired with January guidance distinguishing real equity from synthetic imitations, it signals a deliberate framework rather than a casual concession.
Rule 611, the Order Protection Rule, required every trading venue to route orders to whichever exchange showed the best available quote. The logic in 2005 was sound enough: prevent brokers from deliberately executing trades at inferior prices when better ones existed across the national market system. What the rule's architects couldn't have anticipated was that it would become structurally incompatible with on-chain trading twenty years later. Automated market makers don't route orders. They execute against an algorithmic bonding curve at block time, and they cannot pause a swap because a better quote exists on the New York Stock Exchange. Under the current framework, any broker interfacing with a DeFi pool trading tokenized equities would be in near-constant violation. The rule didn't just discourage on-chain stock trading. It made it legally unworkable.
The SEC voted on June 11 to propose rescinding Rules 611 and 610(e) of Regulation NMS, opening a 60-day public comment period before a final rule expected in early 2027. The agency is replacing the trade-by-trade order protection requirement with a principles-based best execution framework applied at the broker-dealer level, governed by FINRA Rule 5310. Brokers would need to demonstrate policies reasonably designed to achieve best execution overall, not prove NBBO compliance on every individual swap. That shift, from mechanical per-trade rule to broker-level standard, is precisely what on-chain venues need to function.
Coinbase has already moved. The platform launched tokenized stock trading for non-US users and, as reported by Benzinga, Robinhood, Kraken, and Gemini are racing to follow. Robinhood is particularly well-positioned: its retail user base is exactly the demographic that benefits most from 24/7 fractional equity access and instant blockchain settlement, and the platform has been in regulatory talks with the SEC on exactly this product category. Kraken and Gemini, both building out regulated securities infrastructure, have signaled similar ambitions.
The Rule 611 proposal doesn't exist in isolation. In January, the SEC's divisions of Corporation Finance, Investment Management, and Trading and Markets issued joint guidance drawing a sharp line between two fundamentally different things that both get called "tokenized stocks." Issuer-sponsored tokenized securities, where a company integrates blockchain records into its official shareholder register, convey genuine equity ownership including voting rights and information rights. Synthetic third-party products that track a stock's price without any claim on the issuer do not. The January guidance, as Morgan Lewis noted in a February analysis, was largely dispositive for retail-facing synthetic structures: many of them may not be legally offerable in their current form. What it left standing, and what the Rule 611 repeal now makes tradeable on-chain, is the real thing.
The SEC is not simply removing friction. It's creating a two-tier system: genuine tokenized equity with a clear compliance path, and synthetic exposure products facing tighter scrutiny. Platforms that built around authentic issuer-sponsored structures are now ahead; platforms that built around price-tracking derivatives may need to restructure.
The risk the proposal hasn't resolved
Here's the thing: removing Rule 611 doesn't make best execution disappear as a concern. It relocates it. Under the old framework, the rule enforced best execution mechanically at each trade. Under the new framework, the obligation sits with broker-dealers, who must demonstrate through policies and procedures that they're achieving best execution for clients overall. That's a principles-based standard, which is more flexible, but it's also less specific. In liquid markets with transparent pricing, a principles-based approach works fine. In early tokenized equity markets, where on-chain pools may have thin liquidity and wide spreads, the gap between "best available on-chain" and "best available across all venues" could be substantial, and a principles-based rule doesn't automatically bridge it.
The Block reported that analysts see the proposal as a major unlock for tokenized stocks, and the directional assessment is right. But the execution risk is real and the 60-day comment period exists precisely to surface it. Broker-dealers building tokenized equity products will need to build robust best-execution policies before the rule is finalized, not after, because the SEC will scrutinize those policies closely once the trade-by-trade backstop is gone.
The 60-day comment period will surface exactly how much friction remains. Whether it passes quietly or generates material pushback on the liquidity problem, the platforms that spent the last two years building compliant tokenized equity infrastructure are no longer waiting for permission. The ones that built around synthetic price-tracking products are the ones scrambling.
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