The London Stock Exchange Group is preparing a tokenised equities initiative with Payward, the parent company of Kraken, while Coinbase has filed registration documents with the US Securities and Exchange Commission seeking approval to offer equity perpetuals. The developments point to growing institutional interest in bringing equities and equity-linked products onto blockchain infrastructure.
At the same time, the dispute between AMC Entertainment and Robinhood has brought a more difficult question into the open. Can a third party create a token linked to a company’s shares without its consent, and what rights does the person buying that token receive?
Not all tokenised stocks are shares. Depending on their structure, they may represent direct ownership, a beneficial interest in shares held by a custodian, a contractual claim against an intermediary or a derivative that simply tracks the market price.
Architecture Matters
Steve Durbin, Co-founder and CEO of Layer 1 blockchain RYT, says the distinction is determined by the architecture of the product.
“In some structures, the underlying share is held by a custodian or special-purpose vehicle and the token represents beneficial ownership of that share. In others, the investor may only have a contractual claim or economic exposure to the stock price. A different model is to issue the security itself on-chain, where the token is the share rather than a representation of one.
“Those distinctions have real consequences. They determine whether the investor is a shareholder, what rights they can exercise and whether they are also relying on an intermediary to make good on the claim. Two products can both be called tokenised stocks while giving investors very different forms of ownership.”
Different Investors
Chris Mack, CTO of Quote.Trade, says different structures may suit different investors. Someone seeking price exposure may prefer a cash-settled derivative because there is no need to take delivery of the underlying asset or manage its transfer between networks. Depending on the structure, this could also reduce custody, administration and insurance costs.
“Different structures serve different needs. Investors should understand what they own, how settlement works and which rights they can enforce,” says Mack.
The problem begins when those differences are unclear. If a product is sold as equity ownership, Durbin argues that the investor should receive the same fundamental rights associated with a conventional share.
“That means voting rights, dividends, participation in corporate actions and a clear path to legal recourse.
“The question becomes more complicated when an intermediary holds the underlying shares. Investors need to know whether those assets are legally segregated and what happens if that intermediary becomes insolvent. A token can make ownership easier to move, but it should not make ownership rights harder to enforce.”
Mack agrees that voting, dividends, corporate actions and legal recourse must be addressed, although he does not believe every equity-linked product needs to provide identical rights.
“Different investors want different products; some want shareholder rights, while others simply want price exposure. Those differences should be explicit before purchase, and the product must deliver what it promises.”
AMC Robinhood Dispute
The AMC dispute has also raised the issue of issuer consent. AMC has objected to Robinhood offering tokens linked to its shares without the company’s involvement or approval. Robinhood has defended the products, arguing that public companies do not control independently issued financial instruments that reference their share prices.
Durbin says there must be a clear distinction between a third-party product linked to a company and the company’s actual equity.
“Secondary-market innovation does not necessarily require the issuer to approve every new form of exposure to its stock. But if the issuer is not involved, the product should not imply that it carries issuer-backed ownership or shareholder rights that do not actually exist. Investors should be able to tell immediately whether they are buying equity issued by the company or a separate instrument created by someone else.”
Mack draws the boundary between shares and lawful derivatives. Issuers should control the shares they issue and the rights attached to them, he says, but should not have a veto over independent derivatives referencing a publicly available market price.
The longer-term ambition is for the token to function as the security itself. That requires the blockchain record to carry legal authority rather than merely reflecting an asset recorded elsewhere.
“That requires transfer agents, custodians and settlement systems to recognise on-chain ownership and transfers directly,” says Durbin. “It also requires regulation to support a market where the blockchain record is not just a mirror of another ledger but part of the authoritative record of ownership.
“If the legal share still exists somewhere else and the token simply points to it, the token remains a wrapper. The more meaningful change happens when issuance, ownership and transfer can all occur within the same digital framework.”
Mack sees programmability as an important part of that transition. Smart contracts can track ownership, enforce transfer restrictions and automate dividends, interest payments and other corporate actions. The challenge is aligning the code with legally recognised systems of ownership, custody and settlement.
Tokenisation could eventually broaden market access, particularly for private equity, structured products and other assets traditionally available only to institutions or wealthy investors. It could lower minimum investments and reduce the manual administration involved in transferring assets.
However, tokenisation does not automatically create liquidity. If separate platforms issue incompatible versions of the same asset, investors may face a more fragmented market and become dependent on another group of intermediaries.
Liquidity
“The value will come from interoperability,” says Durbin. “If tokenised equities can move across compliant markets while preserving the same ownership rights and protections, they can make markets more accessible and efficient. If they remain trapped inside separate platforms, much of that promise disappears.”
The technology needed to represent and trade stocks on blockchain infrastructure is moving rapidly. The harder task is ensuring that investors know whether they own a share, a claim or a price-tracking product. As tokenised stocks enter the mainstream, that distinction will become central to trust, regulation and adoption.
