In the late 1980s, Nathan Most worked at the American Stock Exchange. Though, he wasn’t a banker or a trader. He was a physicist who had spent years in the logistics business, moving metals and commodities. Financial instruments weren’t his starting point. Practical systems were.

At the time, mutual funds were a popular way to access broad market exposure. They gave investors diversification, but with delays. You couldn’t trade them throughout the day. You placed your order, then waited until markets closed to find out what price you got (by the way, they trade that way even today). The experience felt dated, especially for people used to buying and selling individual stocks in real-time.

Nathan suggested a workaround: create a product that tracked the S&P 500 but traded like a single share. Take the entire index, wrap it in a new format, and list it on the exchange. The proposal was met with scepticism. Mutual funds weren’t designed to be bought and sold like equities. The legal framework didn’t exist, and the market didn’t seem to be asking for it.

He went ahead anyway.

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In 1993, the Standard & Poor’s Depositary Receipts (SPDR) made its debut under the ticker SPY. It was, essentially, the first exchange-traded fund. An instrument that represented hundreds. Initially seen as a niche, it gradually became one of the most traded securities in the world. On many trading days, SPY sees more volume than the stocks it tracks. A synthetic construction gained more liquidity than its underlying assets.

Today, that story feels relevant again. Not because of another fund launch, but because of what’s happening on-chain.

Robinhood, Backed Finance, Dinari and investment platforms like Republic are starting to offer tokenised stocks — blockchain-based assets designed to reflect the price of companies like Tesla, NVIDIA, and even private firms such as OpenAI.

The tokens are pitched as a way to gain exposure, not ownership. There’s no shareholder status and no voting rights. You’re not buying equity in the traditional sense. You’re holding a token that references it.

And this distinction matters because there has already been controversy around this.

OpenAI and even Elon Musk have raised concerns regarding the tokenised equities offered by Robinhood.

@OpenAINewsroom

Robinhood CEO, Tenev, then had to clarify that tokens effectively gave retail investors exposure to these private assets.

Unlike traditional shares issued by a company itself, these are created by third parties. Some claim to hold real shares in custody, offering a 1:1 backing. Others are entirely synthetic. The experience feels familiar: prices that move like stocks, interfaces that resemble broker apps, although the legal and financial substance behind them is often thinner.

Still, they appeal to a certain kind of investor. Particularly those outside the US, who don’t have straightforward access to American equities. If you live in Lagos, Manila or Mumbai, and want exposure to NVIDIA, you typically need a foreign brokerage account, high minimum balances, and long settlement cycles. A token that trades on-chain and traces the steps of the underlying stock at the bourses. What a tokenised stock cuts out of the equation is friction. Think, no wires, no forms, no gatekeeping. Just a wallet and a market.

This kind of access feels novel, though the mechanics resemble something older.

But there’s a practical problem here. Many of these platforms — Robinhood, Kraken, and Dinari — don’t operate in many emerging economies outside the US. It’s still unclear whether an Indian user, for instance, can legally or practically buy a tokenised stock through these routes.

If tokenised equities are to truly widen access to global markets, the friction won’t just be technical. It will be regulatory, geographic, and infrastructural.

How Derivatives Work

Futures contracts have long offered a way to trade on expectations without touching the underlying asset. Options let investors express views on volatility, timing or direction, often without buying the stock itself. In each case, the product became an alternative route into the underlying asset.

Tokenised stocks are arriving with a similar intent. They don’t claim to be better than equity markets. They just offer another way in, particularly for people who’ve long been left on the margins of public investment.

New derivative products often follow a recognisable arc.

At first, there’s confusion. Investors aren’t sure how to price them, traders hesitate on risk, and regulators take a step back. Then, speculators move in. They test the limits, stretch the product, and arbitrage inefficiencies. Over time, if the product proves useful, it gets adopted by more mainstream players. Eventually, it becomes infrastructure.

That’s what happened with index futures, with ETFs, and even with Bitcoin derivatives on CME and Binance. They didn’t start as tools for everyone. They began as speculative playgrounds: faster, riskier, but more flexible.

Tokenised stocks could follow the same path. Initially used by retail traders chasing exposure to hard-to-reach assets like OpenAI or pre-IPO companies. Then adopted by arbitrageurs exploiting price gaps between the token and the underlying share. If volume holds and infrastructure matures, institutional desks might start using them too, especially in jurisdictions where compliance frameworks emerge.

The early activity may look noisy with thin liquidity, wide spreads, and weekend price gaps. But that’s often how derivative markets begin. They are anything but pristine copies. They’re stress tests. Ways for markets to discover demand before the asset itself adjusts.

The structure has an interesting feature or bug, depending on how one chooses to look at it.

Timing gap.

Traditional stock markets open and close. Even most derivatives based on stocks trade during the market hours. But tokenised stocks don’t always follow those rhythms. If a US stock closes on Friday at $130, and something material happens on Saturday – say, an earnings leak or a geopolitical event– the token could begin moving in response, even though the equity itself is static.

This allows investors and traders to factor in the news flow that comes in when the equity markets are shut.

The timing gap becomes a problem only in the scenario where the trading volume of tokenised stocks becomes significantly larger than that of equities.

Futures markets address this kind of challenge with funding rates and margin adjustments. ETFs rely on authorised participants and arbitrage mechanisms to keep the price in line. Tokenised stocks, so far, at least, don’t have those systems in place. Pricing can drift. Liquidity might be shallow. And the connection between the token and its reference asset remains reliant on trust in the issuer.

However, that trust varies. When Robinhood launched tokenised shares of OpenAI and SpaceX in the EU, both companies denied any involvement. There was neither coordination nor a formal relationship.

This is not to say that a tokenised equity offering itself is problematic. But it’s worth asking what you’re buying in these cases. Is it exposure to a price, or a synthetic derivative with unclear rights and recourse?

@amitisinvesting

The infrastructure underneath these products also varies widely. Some are issued under European frameworks. Others rely on smart contracts and offshore custodians. A few platforms, like Dinari, are attempting more regulated approaches. Most are still testing the limits of what’s legally possible.

In the US, securities regulators have yet to define a clear stance. The SEC has made its position known on token sales and digital assets, but tokenised representations of traditional stocks remain a grey area. Platforms are cautious. Robinhood, for instance, launched its offering in the EU, instead of its home market.

Even so, the demand is visible.

Republic, has offered synthetic access to private companies like SpaceX. Backed Finance wraps public stocks and issues them on Solana. These efforts are early, but persistent and are backed by a model that promises to solve for friction, not finance. Tokenised equity offerings may not improve the economics of ownership because it’s not something they are trying to achieve. They are just trying to simplify the experience of participation. Maybe.

And participation is often what matters most to retail investors.

Tokenised stocks, in this sense, aren’t competing with equities. They’re competing with the effort required to access them. If an investor can get directional exposure to NVIDIA in a few taps, via an app that also holds their stablecoins, they may not care that the product is synthetic.

That preference isn’t new, though. SPY showed that wrappers can become primary markets. So did CFDs, futures, options, and other derivatives that began as tools for traders but ended up serving wider audiences.

Oftentimes these derivatives, even front-ran the underlying asset. And while at it, they absorbed sentiment and reflected fear or greed faster than the slower markets beneath them.

Tokenised stocks may follow a similar path.

The infrastructure is still early. Liquidity is patchy. Regulatory clarity is missing. But the underlying impulse is recognisable: build something that reflects the asset, is easier to access, and is good enough for people to engage with. If that representation holds its shape, more volume would flow through it. And eventually, it stops being a shadow and starts being a signal.

Nathan Most didn’t set out to redefine equity markets. He saw inefficiency and looked for a smoother interface. Today’s token issuers are doing the same. Only this time, the wrapper is a smart contract, not a fund structure.

What will be interesting to watch is whether trust in these new wrappers can stand their ground, especially when markets get rough.

They’re not equity. They’re not regulated products. They’re instruments of proximity. And for many users, especially those far from traditional finance or in far-off lands, that proximity may be enough.

That’s it for this week’s deep-dive.

See ya next week.

Until then … stay curious,
Prathik

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