Citadel Securities, the trading giant founded by billionaire Ken Griffin, is calling on the US SEC to hold tokenized equities to the same standards as traditional listed stocks.
In a recent letter submitted to the SEC’s Crypto Task Force on July 21, the firm warned against granting broad exemptions for digital assets that resemble equity securities.
The company said it supports innovation in market infrastructure, but drew a sharp line between true technological progress and regulatory arbitrage.
“Tokenized securities must achieve success by delivering real innovation and efficiency to market participants, rather than through self-serving regulatory arbitrage,” Citadel wrote.
‘Look-a-Like’ Equities Must Follow Same Rules, Citadel Tells SEC
Tokenized equities, issued on blockchains as alternatives to listed securities, have gained momentum. This rise comes as crypto firms push for more flexible regulatory treatment. However, Citadel argued that these “look-a-like” products still meet the definition of securities.
Therefore, it said, they must comply with the same rules that govern the national market system.
Citadel cautioned the SEC against exempting these products from core investor protections. These include best execution standards, trade transparency, and fair access provisions. Instead, the firm called for a transparent and deliberative rulemaking process.
It added that this process should involve all market participants, including exchanges, issuers, institutional investors and retail investors.
Creating Shadow Markets Risks Fragmenting Liquidity, Citadel Says
The firm also rejected the idea of allowing these offerings to operate in a regulatory “sandbox.” It argued that many proposals come from large, well-funded entities. According to the firm, these players are attempting to bypass critical safeguards.
Therefore, it stated: “The Commission should not allow token purveyors to profit simply by avoiding the Commission’s time-tested framework.”
Further, Citadel said the risks go beyond individual investors. It warned that creating parallel markets for tokenized equities could destabilize the broader equities market.
Specifically, it pointed to potential issues like liquidity fragmentation, counterparty risk and confusion over voting rights and tax treatment.
The letter raised concerns about potential disruptions to the ETF market and IPO pipeline. Citadel also questioned whether tokenized equities might reduce transparency in shareholder bases or dampen shareholder engagement, particularly when voting rights are either absent or detached from ownership incentives.
Firm Warns Against Cross-Border Crypto Loopholes
The firm listed several key disclosures it believes should be mandatory before any regulatory relief is granted. These include who is issuing the token, what rights are attached and how prices are aligned with the underlying equities. Additionally, it urged the SEC to work with the CFTC and foreign regulators to prevent cross-border loopholes.
As of June, Citadel Securities was considering entering the crypto trading space. President Jim Esposito has publicly stated that crypto has passed “the point of no return.” He added that it is now an asset class being taken seriously by institutional investors.
The letter signals that while Citadel is open to engaging with crypto markets, it expects regulatory standards to be upheld.
Any regulatory adjustments for blockchain-based assets, the firm insisted, must be applied across the market, not carved out for a subset of players seeking lighter oversight.
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