Synthetic Access, Real Risk: The Trouble with Robinhood’s Stock Tokens

On June 30, 2025, Robinhood Markets, Inc. announced a program aimed at democratizing access to equity in private companies. At the center of this initiative is what Robinhood has termed “stock tokens”—digital assets that closely resemble traditional equity shares in both form and function. However, Robinhood’s tokens diverge from conventional securities in several ways.

Stock tokens are created through a process called tokenization, which refers to the conversion of legal rights to a real asset into a digital token that is recorded on a blockchain. That is, tokenization allows digital tokens to represent ownership claims to the economic benefits of a tangible or intangible asset. Applied here, a tokenized security can replicate the characteristics of traditional equity securities, all while existing exclusively on the blockchain.

On its face, security tokenization is not inherently problematic. When properly structured, it can increase liquidity, expand market access, and modernize trading infrastructure. Yet, the schema of Robinhood’s stock tokens presents significant risks to both investors and the broader economy:

The first key distinction is that, unlike other tokenized assets, Robinhood’s stock tokens offer indirect exposure to the underlying company—they do not (and sometimes cannot) confer an ownership interest in the private entity.[1] To navigate this limitation, Robinhood will create a special purpose vehicle (SPV) whose sole assets are unregistered shares of a private company. The SPV then issues stock tokens to retail investors, representing a derivative interest in the SPV’s stockholdings. But because the private company’s shares do not trade in an efficient market, Robinhood must determine their value through internal methods. This arrangement effectively severs the token from the legal and economic rights typically associated with stock ownership, while still presenting the token as a proxy for synthetic exposure to the company.[2]

Second, the blockchain-based structure of these assets enables their integration into decentralized finance (DeFi) activities such as staking, lending, and collateralization.[3] While the risks posed by these mechanisms are not new, their entering relatively unregulated sectors like DeFi is. This confluence sets the stage for a potentially volatile interaction between underinformed retail investors and complex, leveraged financial instruments—much like the structural vulnerabilities that underpinned the stock market crashes of 1929 and 2008.

Finally, and perhaps most critically, the private companies these stock tokens purportedly represent—such as SpaceX and OpenAI—have neither authorized nor consented to these offerings.[4] Consequently, they are not subject to the continuing disclosure, reporting, or other obligations that federal securities laws impose on public companies. The informational asymmetries this creates will deprive investors of the transparency necessary to make informed decisions and similarly echo the market failures that precipitated the Great Depression, which ultimately prompted Congress to enact the Securities Act of 1933, the Banking Act of 1933, and the Securities Exchange Act of 1934.

At least for now, Robinhood’s stock token program is limited to EU customers, but geography does not mitigate its risks. This much was recognized by SEC Commissioner Hester Peirce, who, in a July 9 statement, cautioned: “Tokenized securities are still securities. Accordingly, market participants must consider—and adhere to—the federal securities laws when transacting in these instruments.” As financial platforms continue to experiment with novel asset structures, investors would do well to remain cautious of offerings that prioritize accessibility over accountability.