When AMC CEO Adam Aron discovered that Robinhood was selling blockchain tokens tied to his company’s stock, and by his count to “190+ other companies,” he wasn’t happy, to say the very least. And he let Robinhood know it.
“I find this practice to be contemptible, outrageous, disgusting, detestable, inexcusable, vile,” he wrote on X September 3, adding that AMC had “no connection to this at all, and do not condone it in any way.”
If Aron’s public fight with Robinhood got attention, so did a full-page ad in the October 24-25 Wall Street Journal urging CEOs to opt out. The ad was taken out by the Common Sense Leadership Fund, a conservative advocacy group that isn’t required to disclose its donors. That’s led even more investors and reporters to start asking questions.
Needless to say, it’s a good time for directors and CEOs to get up to speed if you aren’t already. As most of you likely know, a tokenized share is a digital token on a blockchain that tracks a company’s stock. In the most common model, a third party buys real shares, holds them with a custodian and issues tokens against them. The tokens trade around the clock, often against dollar-pegged stablecoins, and their prices can drift from the price on the exchange.
None of this requires the company’s involvement. Robinhood’s Stock Tokens, for example, are debt securities issued by a separate Robinhood entity and sold only outside the U.S. Holders get price exposure but no vote.
Some of this has been going on outside the U.S. for a while. But on September 17, the SEC opened a path for this kind of trading in the U.S. by issuing an “innovation exemption” allowing for a new class of “tokenized securities venues” or TSVs, to list third-party tokens of exchange-listed stock.
Before doing so, the SEC says, a venue must notify the issuer, and the issuer has 30 days to object. The first venue, OKXICE, a joint venture of crypto exchange OKX and NYSE owner Intercontinental Exchange, proposed tokens for 62 companies.
Since then, 26 of those companies objected, according to CoinDesk, including IBM, Oracle, Intel, Microsoft, Alphabet, Goldman Sachs and JPMorgan Chase. None said why. (CNBC has a good primer here, and a pair of attorneys from Trautman Pepper Locke have a deeper dive worth reading as well.)
As you work to get up to speed on all this, here are a few questions worth asking your legal and investor relations teams:
1. Why are firms declining, and why is AMC so upset? This is the most important thing to pin down. Share tokenization is so new that it’s hard to tell whether it’s a big deal or how it could affect companies. Ask your legal and IR teams for a conversation about it.
2. Who owns this inside our company? A notice from a tokenization venue could land on someone’s desk with a 30-day clock running. Find out whether anyone is responsible for it, and whether a notice has already arrived.
3. Could this change our relationship with our shareholders? People can now hold a stake in your stock price without being shareholders. That raises questions about who you’re communicating with, who gets to vote and who you answer to. Aron’s anger was mostly about this.
4. What’s already trading in our name? Tokenized stock volume on Robinhood Chain rose from $526 million in July to $11.31 billion in September. Asked who votes the shares behind Robinhood’s tokens, CEO Vlad Tenev told CNBC the company “hasn’t really announced plans for the voting aspect of that.” IR should know which products reference your stock and how large those markets are.
5. Are we following the crowd, or is there something in this for us? Microsoft, Goldman and JPMorgan have objected and saying no looks like the safe choice. Supporters argue that tokenization could bring in new investors and round-the-clock trading, which may matter more for some companies than others. The board should know whether an objection is a considered position or a reflex. Saying no now doesn’t rule out embracing tokenization later on the company’s own terms.
6. Do we want a voice in how this gets regulated? The SEC’s rules are temporary and open for comment, and industry groups are already lobbying to change them. If the company has a view, now is when it carries the most weight. Time to dig in.
