Woofun AI reports that the Securities Transfer Association (STA) submitted a letter to the U.S. SEC advocating for clear regulatory distinctions between issuer-authorized and third-party created stock tokens. The STA emphasized that the issuer-approved model should take precedence in any innovation exemptions or pilot programs.

The association argued that third-party tokenized stocks risk misleading investors, diluting shareholder rights, and exposing holders to platform, custodian, and counterparty risks without establishing direct legal ties to issuers. STA called for mandatory explicit issuer approval before platforms package products as tokenized listed stocks and urged DTCC and transfer agents to streamline the Direct Registration System (DRS). Currently, the approximately $2 billion tokenized stock market relies on third-party synthetic models like Ondo Finance and Kraken xStocks due to the absence of formal SEC rules.