A new dispute has surfaced in Washington over tokenized U.S. equities and decentralized finance. The request came in a letter sent on Tuesday. Citadel warned against broad regulatory exemptions for DeFi activity tied to equities. The letter prompted strong criticism from crypto users and advocacy groups across social media channels.
The firm told the SEC that developers and service providers should not receive wide exemptive relief. It specifically identifies DeFi developers, smart-contract coders, and self-custody wallet providers. Citadel said those roles could support trading in tokenized shares. It argued that such support should not place them outside securities regulation.
Citadel Warns of Two Rulebooks for Tokenized Stocks
Citadel said DeFi trading venues may fit the legal definition of an exchange. It also said they may qualify as a broker-dealer. The firm’s view depends on whether the platform enables trading of tokenized U.S. equities. It urged the SEC to apply securities-law standards in that case.
The letter argued that exemptions would create unequal treatment for the same security. Citadel said a tokenized share and a regular share represent the same underlying equity. It warned that allowing DeFi trading with broad relief could lead to two different rule sets. It said that the outcome would conflict with a technology-neutral approach under the Exchange Act.
Citadel’s submission responded to an SEC request for public feedback. The agency is gathering views on how to regulate tokenized stocks. The letter was addressed as part of that process. It focused on DeFi systems used for tokenized equity trading.
Crypto lawyers and industry figures criticized the proposal soon after it became public. Jake Chervinsky, a lawyer and Blockchain Association board member, posted comments on Thursday. He mocked the idea that Citadel would support tools that remove intermediaries. He said the industry expected this opposition.
DeFi Leaders Reject Citadel’s SEC Push on Tokenized Stocks
Uniswap founder Hayden Adams also attacked the recommendation. He said Citadel CEO Ken Griffin was “coming for DeFi” through lobbying efforts. Adams criticized Citadel’s argument on fair access standards. He said open-source and peer-to-peer systems lower barriers to liquidity creation.
The Blockchain Association issued a separate response through its chief executive, Summer Mersinger. She said regulating software developers like intermediaries would harm U.S. competitiveness. She said it would push innovation offshore and would not improve investor protection.
Mersinger urged the SEC to focus on “actual intermediaries.” She described those as entities that stand between users and their assets. She argued that software builders should not be treated as the parties running customer-facing financial services. Her statement rejected the approach outlined in Citadel’s letter.
Citadel has made related arguments before. In July, it wrote to the SEC’s Crypto Task Force about tokenized securities. It said tokenized products should succeed by delivering real efficiency and innovation. It also warned against what it called regulatory arbitrage.
SIFMA, a major securities industry trade group, released a statement on Wednesday. It supported innovation in tokenized securities. It also said these products must follow core investor protections used in traditional markets. SIFMA pointed to recent crypto market disruptions, including an October flash crash, as a reminder of why those frameworks exist.
SIFMA’s position matches its earlier stance from July. It opposed SEC exemptive relief for blockchain and DeFi platforms that issue tokenized assets. It said the same baseline safeguards should apply across market structures. The group framed the issue as market quality and investor protection.
In November, the World Federation of Exchanges weighed in on the same debate. The group asked the SEC to abandon a plan to grant an “innovation exemption” to crypto firms offering tokenized stocks. That message aligned with resistance to broad carve-outs. Citadel’s new letter adds to that pressure as the SEC reviews feedback.