Key Takeaways
- • Galaxy Digital submitted a formal letter to the SEC Crypto Task Force on April 14, 2026, arguing that automated market makers (AMMs) meeting specific criteria should not be classified as "exchanges" under the Securities Exchange Act of 1934, and that liquidity providers on such AMMs should not be classified as "dealers."
- • Galaxy proposes the SEC adopt a conditional innovation exemption framework for tokenized securities trading on AMMs, including whitelisting, volume caps, and required disclosures to ensure market integrity while enabling compliant tokenization architectures.
- • Galaxy Digital became the first Nasdaq-listed company to tokenize its SEC-registered equity (GLXY shares) on a public blockchain via partnership with Superstate, though AMM-based trading of these tokenized shares has not yet been enabled pending regulatory clarity.
- • Galaxy identifies four criteria for AMMs that would qualify for exemption: no discretionary control, full transparency, deterministic settlement, and non-discriminatory access—characteristics that distinguish them from traditional exchange operations.
- • The submission directly counters contrary regulatory viewpoints from SIFMA and other market participants, positioning Galaxy's argument as an alternative legal and policy framework for enabling tokenized securities infrastructure.
Summary
Galaxy Digital Inc., led by CEO Mike Novogratz, submitted a comprehensive written submission to the SEC Crypto Task Force on April 14, 2026, addressing the regulatory treatment of automated market makers used for tokenized securities trading. The submission directly responds to contrary viewpoints from other market participants, including SIFMA, and argues that properly structured AMMs should not trigger traditional securities exchange regulation under the Securities Exchange Act of 1934.
Galaxy's core legal argument centers on two statutory definitions. The firm contends that AMMs meeting defined criteria—no discretionary control, full transparency, deterministic settlement, and non-discriminatory access—are not "exchanges" under the Exchange Act because they lack the organizational structure and functions traditionally associated with stock exchanges. Similarly, liquidity providers on such AMMs are not "dealers" under the statutory dealer-trader distinction, as they trade solely for their own accounts, have no customers, do not solicit orders, and do not provide two-sided quotes. According to Galaxy, these characteristics make dealer registration requirements inapplicable.
Rather than arguing that no regulatory framework applies, Galaxy proposes a middle-ground solution: the SEC could lawfully permit tokenized securities trading on compliant AMMs by adopting a conditional innovation exemption. This framework would include whitelisting of compliant platforms, volume caps on trading activity, and required disclosures to market participants. Galaxy argues this approach ensures market integrity and regulatory oversight while enabling tokenization architectures that advance capital markets efficiency.
Galaxy's practical implementation underscores the urgency of regulatory clarity. The firm has already created an onchain version of its GLXY Class A common stock in partnership with Superstate, making Galaxy the first Nasdaq-listed company to tokenize its SEC-registered equity directly on a major public blockchain. However, Galaxy has not yet enabled AMM-based trading of these tokenized shares pending explicit regulatory permission. Bilateral transfers between allowlisted entities are currently permitted, but the firm is actively working with the SEC to clear the way for broader AMM functionality. This positions the regulatory decision as directly applicable to an operational tokenization architecture already in market.
The submission also references Galaxy's broader tokenization strategy, including a separate partnership with State Street Investment Management to tokenize a private liquidity fund with planned seed investment from Ondo Finance, indicating that regulatory clarity on AMM trading would unlock multiple institutional use cases beyond public equity tokenization.
Galaxy's core legal argument centers on two statutory definitions. The firm contends that AMMs meeting defined criteria—no discretionary control, full transparency, deterministic settlement, and non-discriminatory access—are not "exchanges" under the Exchange Act because they lack the organizational structure and functions traditionally associated with stock exchanges. Similarly, liquidity providers on such AMMs are not "dealers" under the statutory dealer-trader distinction, as they trade solely for their own accounts, have no customers, do not solicit orders, and do not provide two-sided quotes. According to Galaxy, these characteristics make dealer registration requirements inapplicable.
Rather than arguing that no regulatory framework applies, Galaxy proposes a middle-ground solution: the SEC could lawfully permit tokenized securities trading on compliant AMMs by adopting a conditional innovation exemption. This framework would include whitelisting of compliant platforms, volume caps on trading activity, and required disclosures to market participants. Galaxy argues this approach ensures market integrity and regulatory oversight while enabling tokenization architectures that advance capital markets efficiency.
Galaxy's practical implementation underscores the urgency of regulatory clarity. The firm has already created an onchain version of its GLXY Class A common stock in partnership with Superstate, making Galaxy the first Nasdaq-listed company to tokenize its SEC-registered equity directly on a major public blockchain. However, Galaxy has not yet enabled AMM-based trading of these tokenized shares pending explicit regulatory permission. Bilateral transfers between allowlisted entities are currently permitted, but the firm is actively working with the SEC to clear the way for broader AMM functionality. This positions the regulatory decision as directly applicable to an operational tokenization architecture already in market.
The submission also references Galaxy's broader tokenization strategy, including a separate partnership with State Street Investment Management to tokenize a private liquidity fund with planned seed investment from Ondo Finance, indicating that regulatory clarity on AMM trading would unlock multiple institutional use cases beyond public equity tokenization.
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