Citadel Securities said in a letter to the U.S Seurities and Exchange Commission that it is important not to override key investor protections when trading tokenized securities. The market maker said in the letter that the regulator “should identify the intermediaries that will be involved in the trading of tokenized U.S. equities, including via so-called “decentralized” trading protocols” and refrain from granting broad exemptive relief from the longstanding statutory definitions of an “exchange” and “broker-dealer” for those seeking to facilitate the trading of tokenized U.S. equities.”

The letter has faced a backlash from some crypto market participants.

Bill Hughes, lawyer at Consensys, which builds blockchain infrastructure, said:

“Exemptive relief for DeFi trading of tokenized US equities would create two markets for essentially the same asset class: one regulated and one not simply because of the technology involved, which obviously isn’t “tech neutral” (to the extent that is core virtue we must abide by).

Exemptive relief would also deprive investors of important protections that the registration regimes for exchanges, dealers and brokers establish. Simply imposing conditions or caps would not sufficiently protect investors.

The SEC needs to independently assess the offerings out there on the market and observe not only the benefits of tokenizing US equities (they DO acknowledge some!) with the risks, and they need to determine which might be fair and which foul, and how we can have a fairly regulated, unified market that we’ve transitioned to in a fair way.”

You are getting a lot of "how dare they!" opinion tweets without much information, so here is a quick, high-level summary of @citsecurities (not @Citadel but whats the difference really) argument in its letter to the @SECGov crypto task force, to the extent you might find it… pic.twitter.com/eYRbqleMPn

— Bill Hughes 🦊 (@BillHughesDC) December 4, 2025

Mike Cagney, co-founder of Figure, which builds capital markets onchain, said on X that he agree with one aspect of Citadel Securities’ argument – that granting broad exemptive relief to facilitate the trading of a tokenized share via DeFi protocols would create two separate regulatory regimes for the trading of the same security.

Cagney said: “Tokenizing DTCC securities won’t work. It won’t work because trading such securities bilaterally on blockchain violates reg NMS and creates a bifurcated regulatory process (per Citadel’s argument, above), and the SEC doesn’t have the authority to ignore law. But more importantly, it also won’t work because it’s orthogonal to blockchain – you are trading an IOU, not the security. Truth over trust. IOUs are trust. Trust doesn’t work in DeFi.”

The Provenance Blockchain Foundation, whuch supports the public blockchain for financial services, agreed that tokenized equities should be natively issued onchain:

The future of finance won't be built by porting legacy rails onto blockchain.

Native issuance is what separates wrapped IOUs and true onchain markets.

On Provenance Blockchain, assets aren't just represented onchain, they're actually live. That means:

→ real settlement
→… https://t.co/cLxYcakimN

— Provenance Blockchain Foundation (@provenancefdn) December 4, 2025

Cody Carbone, chief executive of blockchain trade association Digital Chamber, said: 

“It is recognizing that when no one provides the core services Congress intended to regulate when drafting the Exchange Act, the regulatory category does not fit. Trying to force software into a framework written for human intermediaries ignores the statutory text, the risk-based foundations of securities regulation, and basic common sense.

In agreeing with Citadel, it’s exactly why Congress is spending years trying to draft new legislation to regulate DeFi trading.”

After reading and re-reading Citadel's letter – granting tailored exemptions to non-custodial protocols is not saying the tech matters more than the services provided. They use this argument several times throughout.

It is recognizing that when no one provides the core services…

— Cody Carbone (@CodyCarboneDC) December 4, 2025

Hayden Adams, founder of the Uniswap protocol, said: “The actual nerve for one of their arguments to be that there is no way for DeFi protocols to provide “fair access” of all things lmao. Makes sense the king of shady tradfi market makers doesn’t like open source, peer-to-peer tech that can lower the barrier to liquidity creation.”

First Ken Griffin screwed over Constitution DAO

Now he's coming for DeFi, asking the SEC to treat software developers of decentralized protocols like centralized intermediaries

Bet Citadel has been lobbying behind closed doors on this for years

Okay thats all pretty bad, but… pic.twitter.com/ExoNhbhadu

— Hayden Adams 🦄 (@haydenzadams) December 4, 2025

The Solana Policy Institute, a non-profit focused on educating policymakers on how decentralized networks like Solana work, said: “We urge the SEC to proceed with thoughtful action that unleashes these benefits for US investors and capital markets.”

The @SECGov’s mandate is to protect investors and facilitate capital formation. Allowing dominant market makers to veto innovation serves neither purpose.

Investors deserve what public blockchains, like @solana, enable: instant settlement, lower costs, greater transparency, and… https://t.co/UCThKXB8SU

— Solana Policy Institute (@SolanaInstitute) December 4, 2025

Summer Mersinger, chief executive of Blockchain Association, the leading trade association representing the crypto industry, said:

The following statement is attributed to @SKMersinger on Citadel’s letter to the SEC, which claims DeFi developers, smart-contract authors, and self-custody wallet providers should be treated as intermediaries subject to securities-law registration.https://t.co/3odP2JepU0 pic.twitter.com/SFieREfHEH

— Blockchain Association (@BlockchainAssn) December 4, 2025

BREAKING: The Horse and Buggy Association is urging the SEC to ban automobiles! https://t.co/DTwyQl89mL

— Colin McLaren (@thecolinmclaren) December 4, 2025