Tokenized Stocks Won’t Win Just Because They Trade 24/7

Tokenized stocks are gaining exchange backing, but round-the-clock trading may not decide their success. Nasdaq recently agreed to invest $100 million in Kraken parent company Payward, while the London Stock Exchange Group prepares its own tokenized shares.

The SEC is also proposing updated transfer agent rules for blockchain-based recordkeeping. The real contest may center on shareholder rights, liquidity depth, official ownership records, and whether a token carries the same legal standing as the share it represents.

Nasdaq, LSEG, and SEC Advance Tokenization Infrastructure

Nasdaq’s venture arm confirmed a $100 million investment in Payward on September 10, extending a partnership announced in March. The companies plan to launch Nasdaq Equity Tokens, called NETs, on Payward’s xStocks platform in the second quarter of 2027. Nasdaq said the initiative aims to preserve regulated market safeguards while extending trading beyond standard hours.

Payward Co-CEO Arjun Sethi described the plan as building rails that “do not close, with shareholder rights intact.” The London Stock Exchange Group is separately preparing tokenized shares, signaling that interest in blockchain-based equities extends beyond US markets.

The SEC is proposing modernized transfer agent rules to account for blockchain-based ownership records. The SEC has also approved a Nasdaq proposal involving blockchain-based trading and settlement for certain equities. In Europe, tokenized securities remain subject to the applicable existing securities framework, including MiFID II, while other crypto assets are separately regulated under MiCA.

Shareholder Rights Remain Undefined for Tokenized Stocks

Around-the-clock trading will not necessarily mean that the token gives holders all of the rights associated with a conventional share. Questions around dividend distributions, voting, custody, and the legal relationship between the token and the underlying asset remain relevant across different stock-tokenization models. These issues may ultimately matter more than extended trading hours.

As noted by the Hashgraph CEO Eric Piscini, one should be careful with the asset being held because it might not represent the actual share directly, but instead an interest in a special purpose vehicle or another structure. In such a case, dividends would not necessarily be paid directly to token holders in the same way as they are to registered shareholders. Smart contracts can automate certain actions, but the rights attached to a token depend on the specific legal and custody structure.

The custodied wrapper approach implemented by Backed and Archax allows trading tokens around the clock, but the settlement and transfer of the underlying shares can still depend on traditional market infrastructure and operating hours. That gap separates token transfers from confirmed ownership records.

Liquidity Gaps Undercut the Case for 24/7 Trading

Extended trading hours only matter if buyers and sellers are present to trade. A stock such as Apple trades tens of millions of shares daily, while tokenized versions often involve a smaller pool of holders. Thin participation can weaken price discovery outside regular market hours.

Dragonfly general partner Rob Hadick has noted that market makers rely on loose hedging strategies overnight, adding that managing collateral “over a weekend” remains difficult without on-chain settlement rails. His remarks point to institutional reasons behind tokenization that extend beyond retail trading convenience.

Tokenized private equity funds and money market funds can demonstrate different liquidity characteristics from publicly traded stock tokens, particularly when their structures are designed around on-chain settlement. Automated market makers and cross-chain liquidity aggregation are being tested to address liquidity constraints, though adoption of these approaches remains limited.

Legal Equivalence Between Token and Share Is Still Unresolved

The clearest unresolved issue is whether a tokenized stock is legally equivalent to the share it claims to represent. Regulators in different jurisdictions continue to consider how blockchain-based trading and settlement should interact with existing market safeguards, including concerns around price manipulation, settlement, custody, and trading during periods of lower liquidity. Traditional markets also rely on mechanisms such as circuit breakers that pause trading during steep declines, while tokenized market structures do not necessarily replicate those safeguards in the same way.

Legal scholar Hilary Allen has argued that tokenization can let firms sidestep protections built into securities law. She noted that many benefits promoted by the crypto industry, including fractional shares and commission-free trading, already exist at conventional brokers.

Some industry participants have argued for hybrid models that combine blockchain-based trading with traditional clearing, custody, and regulatory infrastructure. Such structures could preserve existing legal protections while still extending the hours and programmability of equity markets. Whether those models scale will depend on how regulators define ownership, investor rights, settlement, and the legal relationship between a token and the underlying share.