Tokenized Stocks Face Mounting Risks, DATs Under Fire

• Crypto executives warn of compounded risks for investors in tokenized stocks.
• Market volatility, smart contract vulnerabilities, and legal uncertainties highlighted.

On October 4, 2025 (UTC), Cointelegraph reported on mounting concerns from crypto industry executives over tokenized stocks, citing volatility, legal ambiguity, and blockchain vulnerabilities as key risks. Tokenized stocks, which represent company equity on the blockchain, are gaining traction as a modern approach to trading equity.

The 24/7 nature of blockchain trading introduces a unique challenge for tokenized stocks. Unlike traditional stock exchanges that operate during fixed hours, tokenized stocks can be traded continuously. Crypto executives warned this unrestricted trading could allow sharp price drops to occur outside of traditional market hours, leaving companies vulnerable and with insufficient time to address the situation.

Additionally, tokenized stocks expose investors to layered volatility, compounding risks from multiple sources. Kanny Lee, CEO of SecondSwap, explained that tokenizing equity for companies with digital asset treasuries (DATs) subjects investors to the volatility of both the treasury's crypto holdings and the complexities tied to corporate equity and securities regulation.

Smart contract vulnerabilities also pose significant risks. The blockchain infrastructure supporting tokenized stocks relies on smart contracts, which can be exploited by malicious actors. Furthermore, crypto executives emphasized the potential for hacking and code manipulation as additional threats affecting both the underlying crypto assets and the tokenized shares themselves.

The regulatory outlook adds to the uncertainty surrounding tokenized stocks. While the U.S. Securities and Exchange Commission (SEC) is actively investigating blockchain-based solutions to modernize trading processes, tokenized stocks remain in a legal grey zone. Simultaneously, traditional stock exchanges, including Nasdaq and the New York Stock Exchange, are preparing for extended trading hours to mirror crypto markets. Nasdaq has announced plans to implement 24/5 trading in 2026, aligning more closely with round-the-clock crypto trading models.

As of October 4, 2025, 12:00 UTC, Ethereum (ETH) is trading at $1,620, with a 1.5% increase in 24-hour trading volume, according to CoinMarketCap. Bitcoin (BTC) is priced at $27,850, reflecting a 0.8% volume increase.