Second U.S. Firm tZero Said to Become Crypto Broker Dealer Under SEC Oversight

• Overstock-backed tZero Group Inc. says it’s joined Prometheum Inc. as one of two U.S. special purpose crypto broker dealers.

• The newly licensed firm said it’ll start launching products under its new status early next year.

A second company, tZero Group Inc., said it’s achieved status as a fully registered U.S. broker dealer under a rule allowing for crypto firms to join those ranks, following a path previously blazed by Prometheum Inc.

Such a registration as a special purpose broker dealer under U.S. Securities and Exchange Commission oversight will allow the firm to take custody of customers’ digital assets securities, though that ability bumps right into the industry’s widespread legal battle with the SEC over the regulator’s stance that most crypto tokens are securities. To take custody of crypto securities, tZERO and Prometheum must treat tokens as securities while the industry (including many issuers) is pushing back on that label.

“Our special purpose broker-dealer status will enable us to offer safe, secure and regulated broker-dealer digital asset custody and other new and innovative products for issuers, investors and other market participants alike,” said tZero CEO David Goone, in a statement.

The company – backed by Overstock and New York Stock Exchange parent Intercontinental Exchange (ICE) – said that as soon as early next year, it’ll start opening services for assets including private securities, securitized real estate, art and sports assets. It’ll start with the “full digitization of tZERO’s Series-A preferred equity security,” TZROP, the company said.

The firm had previously registered a trading platform, known as an alternative trading system (ATS), so the addition of the new license will allow custody, clearance and settlement under one umbrella, it said.

An SEC spokesman declined comment on or confirm tZero’s new status.

As of press time, the Financial Industry Regulatory Authority hadn’t updated its BrokerCheck service acknowledging tZero’s approval, so the specific distinctions between Prometheum and tZero in their licensing remain unclear. Earlier filings did confirm tZero can conduct private placements of securities and facilitate digital asset security trading on its ATS.

UPDATE (September 10, 2024, 17:39 UTC): Adds SEC’s decline to comment.