What Are the Main Legal Models for Tokenized Securities in the United States?

US product teams assessing a digital security need to identify the holder’s legal claim and authoritative record before choosing custody, transfer or blockchain architecture.

The four principal US tokenized securities models

The US Securities and Exchange Commission staff separates tokenized securities into issuer-sponsored and third-party-sponsored structures. Within those categories, four tokenized securities models determine what the token represents, who maintains the official record and what rights the holder receives.

The SEC staff statement on tokenized securities, published January 28, 2026, provides the clearest current taxonomy. It is staff guidance rather than a Commission rule or legal safe harbour, but it gives product, legal and operations teams a practical framework for evaluating a structure.

These tokenized securities models can look similar in a wallet or trading interface. Their legal and commercial consequences are materially different.

1. Direct issuer-on-chain securities

In a direct issuer-on-chain model, the issuer issues its security in crypto-asset form and makes the distributed ledger part of its master securityholder file. A transfer of the token changes ownership of the security because the blockchain record is part of the legally operative ownership system.

This model is closest to direct registered ownership. It can be relevant for newly issued private-company equity, debt instruments, fund interests or other securities where the issuer wants a direct relationship with each holder.

The blockchain record may still be incomplete on its own. The SEC notes that investor identity information can remain off-chain while being connected to on-chain data such as wallet address, quantity and issue date. The issuer, transfer agent or another authorised party must therefore maintain a reliable connection between the token, the holder and the governing security records.

Direct on-chain issuance does not remove the need for transfer controls, identity processes, corporate-action administration or a clear process for lost keys, erroneous transfers and disputed ownership.

2. Issuer-sponsored tokens linked to an off-chain register

An issuer can also use a token while retaining its official ownership register outside the blockchain. Under this model, token movement does not itself convey the rights and benefits of the security. Instead, the transfer event instructs, triggers or informs the issuer or its agent to update the authoritative register.

This approach can preserve existing cap-table, registrar or transfer-agent systems while introducing token-based transfer workflows. It may suit an issuer that wants digital transfer functionality without making the blockchain its legal master record.

The key operational issue is timing and reconciliation. A wallet can show that a token has moved before the issuer’s official register has been updated. The legal effectiveness of the transfer therefore depends on the governing documents, the register-update process and the role assigned to the token within that process.

Teams using this structure should state clearly whether token movement is immediately effective, conditionally effective or merely a request for a formal register update. Ambiguity creates avoidable risk in corporate actions, transfer restrictions, disputes and investor communications.

3. Tokenized security entitlements held through an intermediary

A tokenized security entitlement is a third-party structure. The third party holds the underlying security in custody and issues a token representing the holder’s indirect interest in that security.

The token holder does not automatically become the registered owner of the underlying share, bond or fund interest. Instead, the holder’s rights depend on the entitlement arrangement, the relevant account agreement, the custodian or securities intermediary and the records maintained by those parties.

This model fits existing securities that already sit within the US indirect holding system. That system has a longstanding commercial-law framework under Uniform Commercial Code Article 8, which governs securities held through intermediaries and establishes rules for recording and changing ownership interests.

The distinction has practical consequences:

• The intermediary’s records can remain legally decisive even where tokens move on a blockchain.
• Holder rights may be subject to the intermediary’s custody, control and insolvency arrangements.
• Voting, dividends, redemptions and other corporate actions must be administered through the entitlement structure.
• Transfer restrictions may be enforced through wallet controls, account controls or both.

The DTC no-action letter relating to DTCC Tokenization Services provides a concrete institutional example. Under DTC’s preliminary framework, blockchain transfers are tracked through its off-chain LedgerScan system, which constitutes DTC’s official books and records. Registered ownership remains in the name of Cede & Co., while eligible participants hold tokenized entitlements that can be converted back into book-entry entitlements.

That structure shows how tokenization can operate within established market infrastructure while retaining controlled wallets, central records and mechanisms to address erroneous entries, lost tokens or malfeasance.

4. Synthetic linked securities and security-based swaps

The fourth model provides economic exposure to a security without conveying ownership of that security.

A linked security is the third party’s own security, linked to the value or performance of a referenced security. The holder has a claim against the third-party issuer, not against the issuer of the referenced share, bond or fund interest.

A security-based swap can also reference a security or security-related value. According to the SEC staff statement, a security-based swap generally does not provide equity, voting, information or other rights in the referenced security.

This distinction should be explicit in product design and communications. A token that tracks a public equity price may create economic exposure while offering none of the shareholder rights associated with direct ownership. It can also introduce counterparty and insolvency exposure to the third-party issuer that would not arise in the same way for a direct holder of the underlying security.

Security-based swaps may also face additional restrictions, including limits on sales to non-eligible contract participants unless registration and exchange-trading conditions are met.

How regulated functions change across the models

Tokenization does not alter the application of US federal securities laws simply because the asset appears on a blockchain. The relevant question is which regulated functions are being performed and by whom.

Depending on the structure, a project may need to address:

• Securities offering registration or an available exemption
• Transfer-agent activity and recordkeeping
• Broker-dealer activity
• Custody and control of crypto asset securities
• Trading venue and alternative trading system requirements
• Clearing, settlement and securities-intermediary functions

The SEC’s February 2026 FAQs on crypto asset activities and distributed ledger technology state that on-chain transaction data can coexist with off-chain personal data, provided records remain secure, accurate, current, producible and retained as required.

For broker-dealer custody, the SEC has also highlighted operational issues that include private-key controls, blockchain disruption, hard forks, airdrops, lawful freezes and business-failure planning in its statement on custody of crypto asset securities.

These requirements are not implementation details to resolve after launch. They shape the architecture, governance model and user experience from the outset.

Questions to resolve before selecting a structure

A serious tokenization assessment should begin with the legal asset and recordkeeping model rather than the blockchain or wallet design.

Decision-makers should establish:

1. What security or contractual claim is being issued?
2. Who maintains the authoritative ownership or entitlement record?
3. Does the holder receive direct issuer rights, an intermediary entitlement or economic exposure only?
4. Who performs custody, transfer-agent, brokerage, trading and settlement functions?
5. How are voting, dividends, redemptions and other corporate actions handled?
6. What happens after a lost key, erroneous transfer, smart-contract failure or wallet compromise?
7. Can transfers be restricted, frozen, corrected or reversed where the structure requires it?
8. How will on-chain activity reconcile with official books and records?
9. What rights and protections apply if an intermediary or service provider fails?

The answers should appear in the governing documents, custody arrangements, system design and investor communications. A token’s label cannot resolve rights that the underlying legal structure leaves unclear.

The January 2026 SEC taxonomy has made the US market easier to analyse, but it has not made tokenized securities a single legal category. Sound design starts by matching the token’s technical behaviour to the legal interest it is meant to represent.