U.S. markets are the envy of the world because investors trust that whoever owns a share owns it fully, writes Aaron Kaplan, founder of Promethum. The synthetic models cheapens that trust, shortchanges U.S. investors, and undercuts the issuer-led capital markets model.
What Is a Synthetic Tokenized Stock?
At its core, a synthetic tokenized stock is a digital asset that mimics the price movement of a company’s shares but does not represent actual ownership. It is a financial instrument that tracks the price of a stock, often in real time, but operates independently of the underlying equity. These tokens are typically issued by third-party platforms—such as Robinhood—through offshore subsidiaries, and they are designed to allow foreign investors to gain exposure to U.S. equities without going through traditional brokerage channels.
These instruments are commonly referred to as ‘wrappers’ in the industry. The term reflects their function: they wrap around the actual stock, creating a digital proxy that can be traded, but without any connection to the underlying shares. The investor receives price exposure, not equity. This means that when a synthetic token is bought or sold, the transaction does not result in a new share being issued or transferred to the buyer. Instead, the value moves through a digital ledger, with no change in the company’s capital structure or shareholder base.
For example, if a foreign investor buys a synthetic token representing AMC stock, they may see the price rise and fall in real time, but they do not gain voting rights, nor do they receive dividends. The company itself remains unaware of the transaction, and the U.S. stock exchange sees no activity. This creates a disconnect between market activity and actual ownership.
How the Dispute Began: The Robinhood–AMC Conflict
The controversy between AMC’s CEO, Adam Aron, and Robinhood’s CEO, Vlad Tenev, highlights the ideological divide over tokenization. Aron accused Robinhood of tokenizing AMC shares without the company’s consent, calling the product ‘vile’ and describing it as a ‘fictitious synthetic equity market.’ His argument centers on the idea that such actions violate the principle of corporate ownership—no company should allow its shares to be represented by a digital instrument that lacks real rights.
Robinhood, in response, maintains that consent is not legally or ethically required. It argues that global demand for U.S. equity exposure—especially from investors in Asia, Europe, and emerging markets—creates a legitimate need for accessible, efficient trading platforms. Tenev asserts that these synthetic tokens are not a violation of corporate rights, but a response to a growing international interest in U.S. equities. The debate, therefore, is not just about technology, but about the very nature of ownership and market integrity.
Why Synthetic Models Undermine Trust
U.S. markets are the envy of the world because investors trust that whoever owns a share owns it fully. The synthetic models cheapens that trust, shortchanges U.S. investors, and undercuts the issuer-led capital markets model.
They offer price exposure without real rights. A buyer of a synthetic token does not receive dividends, nor can they vote in shareholder meetings. The company does not recognize the investor as a shareholder. This creates a false impression of ownership and distorts the market’s perception of demand. When investors see a stock price rise due to synthetic trading, they may believe the company is growing, when in reality, no new capital has been injected into the business.
This erosion of trust is particularly damaging in an era where global capital flows are increasingly digital. If investors abroad believe that a U.S. stock is accessible through a synthetic token, they may assume that their investment is equivalent to owning a real share—when in fact, it is not. This undermines the credibility of U.S. markets and risks alienating both domestic and international investors.
How Capital Flow Is Misdirected
When a synthetic token is traded, the transaction occurs offshore. The U.S. stock exchange sees no activity—only the initial purchase of shares by the issuer as collateral. After that, all trading happens between token holders, with no connection to the actual exchange or the company’s balance sheet.
As a result, demand from foreign investors does not translate into actual capital growth for U.S. companies. The market capitalization of the company does not increase. This means that the financial health of American firms is not being strengthened by global investment—only the price of the token is being driven up.
With nearly 200 U.S. companies already tokenized this way, and Citi projecting a $2.7 trillion tokenized equity market by 2030, the scale of this misalignment is significant. If every transaction in this space is disconnected from real ownership, then the entire ecosystem is operating on a false foundation. The result is a market that appears to grow, but in reality, it is not.
Regulatory Response: The SEC’s Innovation Exemption
On September 17, the SEC drew the line. Its long-awaited ‘innovation exemption,’ which lets blockchain venues list and trade tokenized securities, excludes synthetic tokens outright. Qualifying tokens must represent real ownership, and, in Chairman Paul Atkins’ words, they ‘must provide holders with the same rights and privileges as the traditional securities,’ dividends and voting included. The SEC’s innovation exemption even addresses AMC’s concerns by requiring that companies get notice and the right to object before a third party tokenizes their shares.
What the Better Model Looks Like: The DTCC Digital Twin Approach
The better model is not a whitepaper or promise; it is already being built at the very center of U.S. markets. A share can be tokenized as a digital twin of a security custodied at the Depository Trust Company, which is the custodian of virtually every publicly traded U.S. share. Under the tokenization service DTCC plans to launch this year, the token and the traditional security are one asset in two forms; the share never leaves the national clearing and settlement system. A foreign investor who buys that token through a licensed venue buys the share, and the order deepens the market Americans trade in.
Why This Matters for American Investors
U.S. markets are the envy of the world because investors trust that whoever owns a share owns it fully. The synthetic models cheapens that trust, shortchanges U.S. investors, and undercuts the issuer-led capital markets model. The digital twin does the opposite: it extends full ownership to millions of potential new investors and directly American companies with increased access to capital.
Limitations and Open Questions
Despite the clarity of the DTCC model, several challenges remain. First, scalability: can the DTCC system handle the volume of global demand without introducing latency or complexity? Second, adoption: will U.S. companies be willing to adopt this model, especially if it requires more regulatory compliance or internal restructuring? Third, investor perception: how will global investors understand the difference between synthetic and real tokens, and will they prefer one over the other?
What to Watch Next
Regulatory enforcement of the SEC’s innovation exemption will be key. If synthetic tokens are allowed to operate without real ownership rights, the integrity of U.S. markets will be compromised. The adoption of the DTCC digital twin model will determine whether U.S. markets maintain their global trust. Additionally, investor behavior may shift as awareness grows—investors may begin to demand transparency and real ownership in all tokenized instruments.
Source: Coindesk Opinion
Sources & further reading
Featured image: The United States Interdiction Coordinator Award Program (44753956365).jpg by CBP Photography, Public domain, via Wikimedia Commons. Image source
