Franklin Templeton asks SEC to let tokenized funds swap for tokenized stocks

Franklin Templeton wants investors to swap tokenized money market fund shares for tokenized stocks on blockchain platforms, and it took the idea to SEC staff on October 9, 2026. The sticking point is a pricing rule from 1940 that was never written for liquidity pools.

At the centre of the discussions is whether investors should be able to exchange blockchain-based fund shares for tokenized publicly traded stocks through trading pairs on blockchain platforms.

The firm is also examining whether liquidity providers could charge fees for facilitating these transactions without conflicting with existing investment fund pricing requirements.

SEC pricing rules create challenges for blockchain liquidity pools

One of Franklin Templeton’s main concerns involves Section 22(d) of the Investment Company Act of 1940 and Rule 22c-1, which govern aspects of mutual fund share pricing.

Section 22(d) generally restricts sales of redeemable fund shares to the prices established under the applicable prospectus framework.

Rule 22c-1 generally requires transactions to occur at a price based on the next net asset value calculated after an order is received. These requirements help maintain consistent pricing practices and protect investors from certain forms of unfair treatment.

The SEC introduced a conditional innovation exemption on September 17, 2026, providing temporary relief from certain exchange and dealer requirements for qualifying blockchain trading venues and liquidity providers.

The framework includes conditions relating to trading volumes, shareholder rights, public smart-contract auditing and trading halts aligned with the primary exchange of the underlying stock.

However, relief from particular exchange or dealer requirements does not automatically resolve every legal issue surrounding fund shares. Tokenized fund trades may still require separate consideration under investment company rules and other securities legislation.

Tokenized ETFs raise questions about fees and legal status

Franklin Templeton’s proposed discussions also cover tokenized ETFs and the assets that could be paired with them on blockchain-based trading platforms.

Potential trading combinations include tokenized stocks, permitted payment stablecoins and tokenized money market fund shares.

Under the Investment Company Act of 1940, certain arrangements that pool investors’ money to invest in securities may qualify as investment companies and become subject to registration and other regulatory obligations.

The question is whether a liquidity pool designed to facilitate tokenized asset trading could fall within that definition. If it does, its operators or structure might need to satisfy applicable requirements or obtain relevant exemptions.

Depending on their structure, those interests could raise additional questions under the Securities Act of 1933, which governs securities offerings and disclosures, and the Securities Exchange Act of 1934, which regulates securities trading and market intermediaries.

These issues show why Tokenized fund trades involve more than transferring an asset from one blockchain address to another. The legal classification of the asset, the trading venue, the liquidity arrangement and the rights attached to each token can all influence how a transaction is regulated.

Franklin Templeton builds on its existing blockchain fund business

Franklin Templeton’s latest regulatory discussions build on its existing work with blockchain-based investment products, particularly the Franklin OnChain U.S. Government Money Fund, commonly identified by its ticker, FOBXX.

The fund uses the firm’s Benji Technology Platform to record ownership and facilitate transactions involving blockchain-based fund shares. Its BENJI tokens represent shares in the underlying money market fund, linking digital token transfers to ownership records for the investment product.

The company has also pursued integrations designed to connect tokenized money market fund exposure with digital asset infrastructure.

Partnerships involving MoonPay and Payward, the parent company of Kraken, reflect broader efforts to connect traditional financial products with blockchain-based services and institutional trading systems.

These developments provide context for Franklin Templeton’s interest in expanding the ways tokenized investment products can be traded. Rather than limiting blockchain to recording ownership, the company is exploring how tokenized assets could participate in more flexible trading arrangements.

The future of Tokenized fund trades will depend partly on whether regulators can accommodate new trading models without weakening investor safeguards. Questions surrounding pricing, liquidity, custody, disclosure and the legal status of pooled assets remain central to that process.

Franklin Templeton’s engagement with the SEC is worth watching, but it does not represent a final regulatory decision. Any future exemptions, conditions or formal guidance could determine which blockchain trading models become viable for regulated funds.

The key development to monitor is whether the SEC provides a clear path for tokenized fund shares to trade through blockchain liquidity pools while preserving the protections that apply to conventional securities markets.