Galaxy Digital Urges SEC to Let Tokenized Securities Trade on AMMs

Galaxy Digital has escalated its push for regulatory clarity on tokenized securities by submitting a formal letter to the SEC's Crypto Task Force this week, arguing that automated market makers should be permitted to facilitate trading in tokenized stocks without registering as traditional exchanges. The filing represents a significant challenge to entrenched Wall Street positions, particularly those of SIFMA, the securities industry's primary lobbying organization, which has advocated for keeping these assets within conventional market infrastructure.

The core of Galaxy's argument rests on technical and structural distinctions. The firm contends that AMMs meeting specific criteria—including deterministic settlement, complete transparency, non-discriminatory access, and absence of discretionary control—should not qualify as "exchanges" under the Securities Exchange Act of 1934. Galaxy further argued that liquidity providers operating on these platforms do not function as "dealers" in the regulatory sense because they trade for their own accounts, maintain no customer relationships, and do not solicit orders. This definitional framing is critical to avoiding burdensome broker-dealer compliance requirements.

Rather than seeking an outright exemption, Galaxy proposed a conditional innovation exemption framework incorporating whitelisting mechanisms, volume caps, and required disclosures—regulatory guardrails designed to preserve market integrity while enabling decentralized trading. The submission frames the broader debate as fundamentally structural: whether tokenized stocks should migrate through decentralized blockchain protocols or remain confined to traditional exchanges and market makers. Galaxy characterized SIFMA's preference for legacy systems as inconsistent with the SEC's own stated technology-neutral regulatory approach.

The timing of Galaxy's filing aligns with the SEC's expanding pro-crypto posture. The agency launched Project Crypto earlier in 2026 to facilitate the migration of capital markets infrastructure onto blockchain rails. In March 2026, the SEC and CFTC jointly issued a taxonomy classifying digital assets into five categories, with tokenized securities explicitly included—a regulatory development signaling official recognition of this asset class's legitimacy. Galaxy itself has moved from advocacy to implementation: it became the first NASDAQ-listed company to tokenize its Class A Common Stock on a public blockchain, with shareholders scheduled to vote on the initiative in May 2026 using Broadridge's governance infrastructure on the Avalanche blockchain.