In recent years, the financial world has witnessed a surge of interest in tokenized assets, especially synthetic tokenized stocks. These digital representations aim to mirror the performance of traditional equities while offering the convenience of blockchain technology. However, despite the hype, many experts warn that synthetic tokenized stocks may actually be detrimental to American investors.

Aaron Kaplan, the founder of Promethum, provides a compelling critique that highlights three core concerns: the erosion of trust in ownership, the unfair disadvantage to U.S. investors, and the undermining of the issuer‑led capital markets model that has long underpinned the United States’ financial system. ### The Foundations of Trust in U.S. Markets The United States has built a reputation for robust, transparent, and reliable capital markets.

At the heart of this reputation lies a simple yet powerful principle: when an investor purchases a share of a publicly traded company, they receive full legal ownership of that share. This ownership confers voting rights, dividend entitlements, and the ability to sell the share on an exchange at any time. The clarity of these rights is enforced by a well‑established regulatory framework, including the Securities Exchange Act, the SEC, and a network of custodians and clearinghouses that guarantee settlement and protect against fraud. Investors worldwide look to the U.S.

market as a benchmark for security and fairness. They trust that the share certificate—whether in paper form or electronic record—represents a direct claim on the company’s assets and earnings.

This trust is not merely a psychological comfort; it is a legal guarantee that underpins the willingness of millions of individuals and institutions to allocate capital to American firms. ### Synthetic Tokenized Stocks: A Different Kind of Claim Synthetic tokenized stocks differ fundamentally from traditional shares.

Rather than representing a direct claim on the underlying equity, a synthetic token is a derivative contract that tracks the price movements of the target stock. The token itself is typically issued by a third‑party platform that holds a pool of collateral—often cash or other assets—to back the token’s price exposure. When an investor buys a synthetic token, they are essentially entering into a contract with the platform, not acquiring the actual share.

This arrangement introduces several layers of risk and ambiguity: 1. **Counterparty Risk**: The investor’s exposure depends on the platform’s ability to maintain sufficient collateral and honor redemption requests.

If the platform fails, the token may become worthless, even if the underlying stock remains healthy. 2.

**Lack of Direct Ownership Rights**: Token holders do not receive voting rights, dividends, or any of the corporate governance benefits that come with true share ownership. Their participation is limited to price appreciation or depreciation. 3.

**Regulatory Uncertainty**: Because synthetic tokens are not classified as securities in the same way as traditional shares, they often exist in a regulatory gray area. This can lead to inconsistent consumer protections and enforcement. ### How Synthetic Tokens Shortchange U.S.

Investors Kaplan argues that synthetic tokenized stocks undermine the very advantages that make U.S. markets attractive. First, by replacing direct ownership with a contractual claim, these tokens dilute the transparency and certainty that investors rely on. When an investor cannot vote on corporate matters or claim dividends, the perceived value of the investment changes, often without clear disclosure.

Second, synthetic tokens can create a two‑tiered market. Institutional investors and sophisticated traders may have the resources to assess counterparty risk and manage collateral, while retail investors—who are the backbone of many U.S.

equity markets—may lack the expertise to evaluate these nuances. This disparity can lead to a scenario where less‑informed investors inadvertently expose themselves to higher risk, effectively subsidizing the profits of platform operators. Third, the proliferation of synthetic tokens may divert capital away from the traditional issuer‑led model.

In the conventional system, companies raise money by issuing new shares directly to investors, often through an initial public offering (IPO) or secondary offering. The proceeds go straight to the issuer, funding growth, research, and development. Synthetic tokens, on the other hand, allow investors to speculate on a stock’s price without providing any capital to the issuing company. This decoupling reduces the flow of fresh funding to U.S.

businesses, potentially slowing innovation and job creation. ### Undermining the Issuer‑Led Capital Markets Model The issuer‑led model is a cornerstone of American financial stability.

It aligns the interests of companies and investors: companies receive capital to expand, while investors receive equity stakes that reflect ownership and potential upside. This alignment is reinforced by disclosure requirements, audit standards, and the fiduciary duties of corporate boards. Synthetic tokens disrupt this alignment.

Because they do not involve the issuance of new equity, they bypass the rigorous disclosure and reporting processes that protect investors. The token platforms may provide price feeds and basic information, but they lack the depth of financial statements, proxy materials, and regulatory filings that publicly listed companies must produce.

Consequently, investors are left with a fragmented information set, increasing the likelihood of mispricing and market inefficiencies. Moreover, the existence of synthetic tokens can erode confidence in the traditional market. If investors perceive that they can obtain similar price exposure through a more convenient, lower‑cost token, they may shift their trading activity away from regulated exchanges. This migration could reduce liquidity in the primary market, widen bid‑ask spreads, and increase volatility for the underlying stocks.

### Potential Mitigations and the Path Forward While the concerns are significant, there are potential pathways to mitigate the risks associated with synthetic tokenized stocks. Regulators could require platforms to hold transparent, audited collateral reserves and to disclose the exact nature of the contracts offered to investors. Clear labeling of synthetic tokens as derivatives rather than securities would help set appropriate expectations. Additionally, integrating token platforms with existing custodial infrastructure could bridge the gap between blockchain innovation and traditional market safeguards.

For example, a token could be backed by a custodial account that holds the actual shares, turning the token into a true representation of ownership rather than a synthetic proxy. Finally, education is crucial.

Retail investors need accessible resources that explain the differences between owning a share and holding a synthetic token. Financial literacy initiatives, combined with straightforward platform disclosures, can empower investors to make informed choices. ### Conclusion Synthetic tokenized stocks present an alluring blend of modern technology and financial speculation, but they also pose serious challenges to the foundational principles of U.S.

capital markets. By substituting direct ownership with contractual exposure, they erode the trust that investors place in the market, create inequitable risk profiles for retail participants, and divert capital away from the issuer‑led model that fuels corporate growth. As the financial ecosystem continues to evolve, it is essential for regulators, platforms, and investors to collaborate on establishing clear standards and protections. Only by doing so can the benefits of blockchain innovation be harnessed without compromising the integrity and fairness that have made American markets a global benchmark.