A dispute between AMC CEO Adam Aron and Robinhood over tokenized stock has reignited debate about which tokenization models are legitimate and what infrastructure is needed to support a functioning stock token market.
Aron called Robinhood's tokenized AMC shares a "quasi-fake market" and threatened legal action, while Robinhood's Vlad Tenev countered that a public company cannot approve every product built on its stock. The argument centers on two different tokenization approaches: wrapped tokens, which represent claims on underlying shares, and issuer-sponsored tokens registered with transfer agents.
Regulatory Framework
On September 17, the SEC issued guidance granting a five-year exemption allowing tokenized U.S. stock to trade onchain domestically, provided the token carries the same dividends, voting rights, and class rights as the underlying share. Synthetic exposure products like Robinhood's model were excluded from the exemption.
Price Volatility During Off-Hours
Analysis of Robinhood's AMC token reveals price stability when traditional markets are open but significant volatility after hours. Between August 31 and September 9, the token closed within 0.87% of AMC's NYSE closing price at the median during regular trading sessions. However, leading up to midnight on September 3, the token spiked to $23.16—nine times AMC's $2.54 closing price from seven hours earlier—before falling back to $3.26 within the same hour, with $10.5 million in volume during that period.
The spike occurred during hours when the token's authorized participant could mint and redeem, but onchain data showed no activity at that time. Minting activity resumed on September 4, concentrated between noon and 7 p.m. ET, a half day after the token had depegged and recovered.
Wrapped Token Structure and Limitations
Wrapped tokens are typically structured as claims against offshore issuers that collateralize tokens with underlying shares. In theory, a 1:1 match between stock positions and token claims should keep prices aligned, but in practice, the instruments trade separately and can diverge. Normally, arbitrageurs maintain alignment, but Robinhood's model names only one authorized participant for creating and redeeming tokens.
Without infrastructure to borrow tokens, new token supply requires pre-funding with the issuer by purchasing shares during market hours. During closed markets, dealers cannot easily capture premiums or manage inventory, turning price discrepancies into proprietary bets rather than arbitrage opportunities. Additionally, unrelated speculation can distort pricing: onchain data showed that demand for a memecoin quoted in tokenized AMC caused the stock token's price to fluctuate based on memecoin demand rather than AMC fundamentals.
The SEC's exemption caps onchain trading of tokenized stock at 0.25% of large-cap average daily volume and 2.5% for other listed stocks to limit price dislocation effects. Wrapped tokens issued offshore to non-U.S. holders, including Robinhood's, fall outside SEC jurisdiction.
Issuer-Sponsored Tokens
Issuer-sponsored tokens represent registered shares with issuer and transfer agent involvement. Beyond offering 24/7 trading and programmability, these tokens carry voting rights and corporate action benefits. Market makers quoting issuer-sponsored tokens reference the security itself rather than a claim on it, eliminating conversion risk between instruments and counterparty risk from intermediaries.
However, issuer-sponsored tokens lack the distribution reach of wrapped tokens outside their regulatory perimeter. Currently, few names trade on this model, and liquidity remains thin.
Building Market Infrastructure
The path forward requires coordination across multiple industry participants. Running wrapped and issuer-sponsored token models simultaneously could provide mutual benefits: wrapped token markets would gain live price references and arbitrageable instruments, while issuer-sponsored markets would receive flow from arbitrageurs. Collateralizing wrapped tokens with issuer-sponsored tokens could enable creation and redemption on the same system, settling in seconds without depending on cash market share sourcing.
Exchanges, brokers, fund managers, market makers, transfer agents, and clearinghouses each control pieces of the necessary infrastructure, but no single firm can build the complete system independently. Industry groups like the IST Coalition are working to facilitate coordination among these participants.
