TLDR

• SEC Commissioner Hester Peirce urged firms exploring tokenization to meet directly with regulators to discuss product structures.
• Hester Peirce said the SEC wants companies to engage early as they develop tokenized securities and crypto-linked ETFs.
• She confirmed that SEC staff are working on a narrower innovation exemption for limited tokenized securities trading.
• Peirce stated that the SEC does not judge investment quality but focuses on disclosure and compliance standards.
• She addressed scrutiny of leveraged ETFs and said sponsors must meet statutory limits and risk disclosure requirements.

SEC Commissioner Hester Peirce urged asset managers to engage regulators on tokenized products and new exchange-traded structures. She said the agency wants firms to discuss proposals directly as markets evolve. Peirce also addressed leveraged ETF oversight and outlined plans for a narrower innovation exemption.

Hester Peirce invites dialogue on tokenization plans

Hester Peirce said firms developing tokenized instruments should approach the SEC early in the process. She stated, “It really is a ‘come in and talk to us’ about what you’re trying to do.” She added that the agency wants to work with sponsors as they test whether markets demand these products.

She explained that asset managers continue to explore blockchain-based securities within exchange-traded funds. She said the SEC prefers direct engagement instead of informal assumptions about compliance. She also said staff expect legal and technical questions as tokenization efforts expand.

Peirce noted that more companies have contacted the SEC about tokenization proposals. She said attitudes toward blockchain technology have shifted in recent years. She stated, “People have come to us and said we really think tokenization has potential here.”

She referred to discussions at the SEC’s Investor Advisory Committee about a limited innovation exemption. She said staff are working on a “narrower” framework for certain tokenized securities. She explained that the approach would allow targeted trading within existing securities laws.

SEC reviews leveraged ETF structures and disclosure rules

Peirce addressed the SEC’s review of highly leveraged exchange-traded funds. She said the agency does not judge whether products are good or bad investments. She stated, “It is our job to work with sponsors to make sure that they’re disclosing what those products are and what the risks are.”

She explained that current rules impose leverage limits on registered funds. She said sponsors may propose structures that exceed typical thresholds under securities laws. She added that firms must demonstrate how their products comply with statutory requirements.

Issuers have tested structures that extend beyond triple-leveraged ETFs offered by firms such as ProShares. Peirce said the SEC has seen increased proposals related to higher leverage levels. She noted that disclosure standards remain central to product approvals.

Peirce said the SEC expects operational and compliance questions as firms test new models. She said the agency wants to engage with industry participants during that process. She stated, “We want to walk side by side with you as we think through those questions.”

She confirmed that the proposed exemption would not create a broad carve-out from securities rules. She said the framework would preserve investor protections while allowing limited experimentation. She said staff continue refining the proposal following committee discussions.

Industry participants have argued that tokenized assets may improve settlement speed and ownership tracking. Regulators have emphasized maintaining disclosure and oversight standards for any approved products. Peirce’s comments came during an interview on CNBC’s The Exchange on Monday.