At first glance, it appears both sides have a point. If tokenized stock trading breaks into the mainstream, it would threaten Citadel’s business model of paying firms like Robinhood for their orders and using that volume to make trading profits. So the company’s letter to the SEC is clearly based in self-interest. That said, Citadel’s concerns about liquidity are not unreasonable—if the pool of U.S. stocks is divided into two separate pools, doesn’t that make trading more expensive for everyone? Likewise, it’s fair to ask if the SEC would be wise to grant exemptions on investor protection rules that have historically served the public very well.
In reading the letter, it’s remarkable to read its claims that the likes of automated AMMs, block builders, validators and layer 2 blockchains are basically brokerages—less for the argument itself, than that Citadel and the SEC are discussing this stuff at all. It wasn’t long ago when only a handful of crypto diehards knew what these terms even meant. Now, they have become mainstream enough to be part of a non-crypto firm’s correspondence with the SEC, and there is no doubt they’re here to stay.
As for which side is going to prevail, it’s worth noting the fight pits two of the most powerful firms in the country against each other. On one side, there is Citadel, which is owned by Ken Griffin, one of the richest and most combative people in the country. On the other is Andreessen, an influential VC firm that doubles as a PR firm and lobbying agency with immense clout in Washington, DC. For now, it feels Griffin may be able to slow down the spread of tokenized equities but, as with any superior technology, he will be unable to stop it.
