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If today’s first blog was still a little too technical for you, this Ashurst Perkins Coie memo gets straight to the point. It lays out five reasons why public companies tend to be uneasy about third-party tokenization in particular:

– Market activity is imminent: Tech-forward exchanges and third parties are moving quickly to tokenize public company stock, often with little advance notice to public company issuers. From both market and regulatory perspectives, a public company’s inaction or delayed response to a third-party TSV’s notice of plans to tokenize and trade the issuer’s stock will be interpreted as consent that cannot later be revoked.

– Time-pressured response: The exemption requires rapid review and coordinated responses. Public companies have only 30 calendar days to object before token trading can begin.

– Investor relations and market complexity: Shareholder records, engagement, and communications will grow more complex if, and when, stocks circulate as tokens in digital wallets.

– Litigation and reputational risk: Misunderstandings regarding tokenized securities or an inadvertent failure by the issuer to object to a TSV’s notice could create uncertainty, or even possible liability, with respect to market participants, shareholders, or regulators.

– Strategic flexibility: Decisions about whether to object to or collaborate with TSVs, or explore self-tokenization, may significantly affect a public company’s future options and risk profile.

The memo also walks through practical considerations and suggests these action steps:

Audit and update SEC-listed contacts: Confirm that executive office addresses and emails in SEC filings are current and monitored frequently. Train your mailroom and other staff to escalate such notices immediately to legal and compliance teams.

Prepare rapid objection protocols: Draft template objections and establish internal review and escalation processes. The 30-day deadline is inflexible and strictly enforced—missing the deadline is irreversible.

Enhance investor and public communications: Prepare FAQs, market alerts, and public statements in advance to address company policies on tokenization. Actively monitor media and trading venues to detect market misstatements or investor confusion that may require clarification.

Cross-functional coordination: Ensure legal, compliance, finance, IT, governance, and IR teams are aligned and ready to respond together, including developing playbooks for rapid coordination if notice is received.

Regular monitoring: Employ technology and monitoring protocols to track the market for unauthorized or synthetic tokenized versions of your stock. Act promptly if you detect noncompliant offerings and consider legal, regulatory, and communications remedies.

Weigh strategic opportunities: If the company may wish to explore tokenization in the future, now is the time to consider criteria for partnership, potential use cases, and appropriate disclosures.

Engage in public comment: The SEC is actively seeking feedback concerning the Innovation Exemption. Submitting thoughtful comments will help shape the evolving regulatory framework, and it is important that public companies make their concerns heard.

There are still a lot of open questions on this topic, and we’ll be discussing them next week at our “Proxy Disclosure & 23rd Annual Executive Compensation Conferences.” Among other informative sessions on our agenda, join Era Anagnosti of DLA Piper, Eun Ah Choi of Nasdaq and Reid Hooper of Fannie Mae on Monday, October 12th at 1:30 pm ET to hear about the latest trends in tokenization & blockchain – and what they mean for public companies. You can still register. Sign up online, email info@ccrcorp.com or call our team at 800-737-1271 today.

Members of this site can also access more resources on the “Innovation Exemption” and related issues in our “Tokenization” Practice Area.

– Liz Dunshee