Citadel Securities is urging U.S. regulators to move cautiously as they assess whether to grant exemptions that would allow Americans to trade tokenized U.S. equities on decentralized finance (DeFi) platforms.
In a 13-page letter to the Securities and Exchange Commission (SEC), the firm stated that tokenization could enhance settlement, shareholder engagement, and investor choice. But it warned that the benefits will only materialize if core investor protections remain intact.
The company said tokenized shares should “succeed on the merits,” not through special regulatory breaks that place them outside the framework governing traditional equities.
Citadel: DeFi Platforms Function Like Exchanges
A major focus of the letter is the claim by some crypto advocates that DeFi protocols allow “peer-to-peer” trading without intermediaries. Citadel argued this is inaccurate.
According to the firm, many DeFi systems meet the legal definition of an exchange because they bring together buyers and sellers using established, automated rules. Citadel said the technology may differ, but the function is the same.
Let’s be real: if the SEC starts treating every tokenized stock like it’s a security + crypto hybrid, 90 % of the projects die overnight and Citadel just keeps printing money the old way. This letter is self-preservation dressed as innovation.
— Rei (@KyoMemes) December 4, 2025
The firm also pointed to the involvement of developers, governance bodies, wallet providers, trading apps, automated market makers, and liquidity providers. These groups, Citadel said, often play roles similar to brokers or dealers because they route orders, charge fees, or influence trade execution.
Warning Against Two Separate Rulebooks
Citadel also pushed back against industry requests for broad exemptive relief.
Granting such relief, the firm said, would create “two separate regulatory regimes” for the same security — one strict for traditional markets and one lenient for tokenized markets.
The firm argued that this would violate the technology-neutral principles of U.S. securities law and risk exposing retail investors to unregulated intermediaries.
Citadel said the SEC lacks authority to waive key protections tied to exchanges and broker-dealers and emphasized that millions of Americans rely on equity markets for retirement security.
Read between the lines of Citadel’s “everyone in crypto is an intermediary” letter to the SEC and you see an attempt to establish standing for a lawsuit once the SEC adopts its long-promised innovation exemption.
TradFi’s about to run the crypto policy playbook circa 2023. Glhf!
— Jake Chervinsky (@jchervinsky) December 5, 2025
Calls for a Clear Regulatory Path
The firm recommended that the SEC:
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Identify all intermediaries in tokenized equity trading, including those operating through DeFi protocols.
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Avoid granting sweeping exemptions from exchange and broker-dealer rules.
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Use formal rulemaking and focus on improving clearing and settlement.
Citadel concluded that innovation should continue, but not at the expense of market integrity and investor safety. This letter comes amid changing US regulations. The SEC recently hinted that all markets could go on-chain in as early as two years time.
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