Microsoft, McDonald’s, Verizon, and Others Tell Crypto Platform Not to Tokenize Their Stocks

Both crypto startups and more traditional financial institutions have spent the past year promoting tokenized stocks as the next major use case of blockchain technology. But many publicly traded companies aren’t interested in the sales pitch. Microsoft, Alphabet, McDonald’s, Goldman Sachs, and Wells Fargo are some of the latest companies to reject plans for tokenized versions of their shares, joining previous objections from Verizon and others.

Last month, AMC Entertainment CEO Adam Aron also publicly clashed with Robinhood over the fintech firm’s decision to tokenize the theater chain’s stock without permission, calling the practice “contemptible, outrageous, disgusting, detestable, inexcusable, vile.”

Companies Exercise Their Objection Rights

According to Reuters, at least 22 companies have formally objected to stock tokenization plans by OKXICE, a joint venture between crypto exchange OKX and Intercontinental Exchange (the parent of the New York Stock Exchange). Microsoft and Alphabet joined Goldman Sachs, Caterpillar, McDonald’s, Qualcomm, and Western Digital in a new batch of objections disclosed on the 19th, according to Fortune. Later in the week, Reuters reported six additional objections, including Intuit and Wells Fargo. These latest reports followed nine earlier objections from CoreWeave, Verizon, Applied Optoelectronics, Broadcom, UnitedHealth Group, and others.

OKXICE, which is co-chaired by former New York Governor Andrew Cuomo, announced plans this month to offer round-the-clock trading in tokenized versions of 63 U.S.-listed stocks under a temporary exemption from the U.S. Securities and Exchange Commission (SEC). Cuomo downplayed the objections in a written statement to Fortune. “We always anticipated that, because this is such a dramatic and revolutionary change, many companies would want to wait and see how it goes rather than be the first to participate,” he said.

Applied Optoelectronics told Fortune it objected because the framework is new and its potential effects on pricing, liquidity, and volatility remain uncertain. “At this stage, we don’t see a clear benefit to AOI or our shareholders that justifies these uncertainties,” a spokesperson said. The company also worried investors might mistakenly believe it sponsored or endorsed the offering. Apple, Nvidia, and Amazon are among the companies that had not publicly objected as of the Fortune report, though notices sent in early October give them until early November to respond.

Tokenization Hype vs. Reality

Tokenized stocks have been promoted by everyone from BlackRock to Coinbase as the next big thing in crypto, as proponents say the technology can enable 24/7 trading, broader access to U.S. equities, and more. Of course, critics counter that a blockchain is not a technical requirement for those features and that much of the activity looks more like regulatory arbitrage by centralized entities seeking additional revenue than the so-called “democratization of finance.” Similar points have been raised about the industry’s heavy use of centrally-issued stablecoins and corporate-controlled blockchains, two common themes that are both found in Circle’s Arc network, which has an uncanny resemblance to the fictional Ecoin project from the TV series Mr. Robot.

For now, crypto platforms do not need proactive permission from the companies whose stocks they want to tokenize under the SEC’s Innovation Exemption, which was issued last month after the Clarity Act stalled in the Senate. Instead, platforms must notify the company, which then has 30 days to object. Erin Martin, a partner at Morgan Lewis and former senior SEC lawyer, told Fortune, “If they don’t object within that 30-day notice period, the [venue] can go ahead and start to tokenize and list those securities.”

Martin also noted practical issues with the notice process, such as the risk that notices sent to a company’s main executive office get buried before reaching the legal team. An unanswered notice allows the platform to proceed after the deadline. The SEC’s rules do not clearly address whether a company can reverse its decision after the window closes.

Additionally, an objection only blocks trading on that specific platform under the exemption. It does not prevent other firms from offering tokenized versions overseas or through different legal arrangements, as Robinhood has done. But those alternative approaches are not necessarily immune to legal scrutiny, as AMC already challenged Robinhood over its AMC-linked tokens as part of the aforementioned dispute.

The SEC’s exemption also provides a five-year window for Tokenized Securities Venues to trade certain tokenized National Market System stocks without registering as national securities exchanges, provided the tokens carry the same rights and privileges as the underlying shares, including dividends and voting rights.

Crypto companies continue to spend heavily on congressional campaigns in an effort to shape the rules in their favor going forward, as current SEC policy can be overturned by a future administration that is less enthusiastic about this technology. The industry’s campaign spending failed to secure passage of the Clarity Act in its current form, which would have solidified much of the federal government’s current stance on crypto into law. But the legislation is likely to be revisited at some point. That said, it’s possible Congress will have an even more adversarial stance on the crypto industry by the time that happens, in large part thanks to all of Trump’s massive crypto-related profits and the alleged corruption associated with those gains.