Robinhood vs Do Kwon: SEC Clarifies on Stock Tokens
The US Securities and Exchange Commission launched a complete classification framework for tokenized securities on the identical day Robinhood’s CEO publicly known as for inventory market tokenization.
Meanwhile, Terra’s Mirror Protocol—the primary large-scale experiment in artificial tokenized securities—ended with over $40 billion in investor losses and its founder’s responsible plea, underscoring the pressing want for regulatory readability.
SEC Presents Tokenized Securities Framework
On January 28, the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets collectively issued a “Statement on Tokenized Securities.” The assertion systematically classifies varied buildings of blockchain-recorded securities and specifies how present federal securities legal guidelines apply to every sort.
The SEC divided tokenized securities into two broad classes. The first is “issuer-sponsored tokenized securities,” the place firms immediately subject their very own securities in token type. In this case, the blockchain capabilities as a part of the grasp securityholder file. Token transfers represent transfers of securities possession.
The second is “third-party-sponsored tokenized securities,” the place events unaffiliated with the issuer tokenize present securities. The SEC additional subdivided this into custodial and artificial fashions. Custodial fashions maintain the underlying securities in custody, with tokens representing oblique possession pursuits. Synthetic fashions present solely worth publicity with out conferring precise possession rights.
Mirror Protocol: The Dark Precedent
The first large-scale experiment in what the SEC now defines as “artificial tokenized securities” was Mirror Protocol. Do Kwon launched it in December 2020. The platform, constructed on the Terra blockchain, purportedly enabled buying and selling in artificial variations of US-listed shares like Apple and Tesla.
Do Kwon promoted the venture as “granting intuitive entry to world monetary markets for disenfranchised customers.” He claimed Mirror operated in a decentralized method. Neither he nor Terraform performed any position in its governance, he stated.
The actuality was starkly totally different. According to the US Attorney’s Office’s December 2025 sentencing statement, Do Kwon and Terraform “secretly maintained management over Mirror, and used automated buying and selling bots to control the costs of artificial property.” He additionally “triggered Terraform to inflate key person metrics to deceive buyers in regards to the extent of Mirror’s adoption and decentralization.”
Mirror was a part of a broader fraud scheme at Terraform. When UST and LUNA collapsed in May 2022, buyers misplaced over $40 billion. Do Kwon was arrested in Montenegro in March 2023 whereas touring on a fraudulent passport and was sentenced to 15 years in prison on December 11, 2025.
Robinhood Stock Tokens: A Different Approach
Robinhood already offers over 2,000 US inventory tokens in Europe. The firm describes them as “tokenized contracts that observe [stock] worth” and “spinoff contracts that don’t grant rights to underlying securities”—becoming squarely into the SEC’s artificial tokenized securities class, similar to Mirror.
But the variations are substantial. Robinhood operates as a regulated monetary establishment, complying with MiFID II and transparently disclosing the spinoff nature of its merchandise. The firm states that underlying property are held by a US-licensed establishment. Investors can begin with as little as €1 and obtain dividends when eligible.
Mirror, in contrast, disguised itself as a “decentralized group venture” to evade regulation, whereas Do Kwon secretly managed it. Its collateral was the algorithmic stablecoin UST, which finally collapsed.
Tenev’s Vision: From GameStop to Tokenization
Robinhood CEO Vlad Tenev issued his statement on January 28—precisely 5 years after the GameStop buying and selling halt that thrust his firm into disaster. He recognized the T+2 settlement system as the basis trigger, arguing that tokenization-enabled real-time settlement is the answer.
“T+1 continues to be far too lengthy, notably if you consider that it actually means T+3 on Fridays, or T+4 on lengthy weekends,” Tenev wrote. Blockchain-based tokenization would get rid of settlement threat and allow prospects to commerce freely at any time.
Tenev introduced plans to allow 24/7 buying and selling and DeFi entry throughout the coming months. Investors may self-custody their inventory tokens and use them for lending and staking. If realized, this could shift Robinhood’s construction from artificial to custodial. It may handle the present threat: whole capital loss if the corporate goes bancrupt.
The Push for Regulatory Clarity
Tenev praised the present SEC management for supporting tokenization experiments and urged the passage of the CLARITY Act, which is under consideration in Congress. “Legislation would be sure that subsequent commissions can’t abandon or reverse the progress achieved by this SEC,” he wrote.
The SEC assertion represents employees views with out authorized binding drive, however the precedent of Mirror Protocol demonstrates what regulatory gaps can produce. Do Kwon constructed his fraudulent empire by claiming “decentralization” exempted him from securities legal guidelines—a declare the SEC’s new framework explicitly rejects.
The publish Robinhood vs Do Kwon: SEC Clarifies on Stock Tokens appeared first on BeInCrypto.