What Is an STO? Security Token Offerings Explained

A security token offering (STO) is a sale of securities – shares, debt, fund units or revenue rights – in which the investor’s ownership is recorded as a token on a blockchain. The token changes the format, not the law. SEC Commissioner Hester Peirce put it in one line on 9 July 2025: “Tokenized securities are still securities.” An STO therefore needs what any securities offering needs: a registration or an exemption (in the US usually Regulation D, Regulation S, Regulation CF or Regulation A), offering documents, investor verification, a licensed broker-dealer where the sale is brokered, and an accurate record of who owns what. What the token adds is a register that updates itself and transfer rules written into the asset.

Stobox is not a broker-dealer, investment adviser, custodian or law firm, and this article is general information, not legal, tax or investment advice.

Key takeaways

• An STO is a securities offering in token format. The SEC staff statement of 28 January 2026 describes a tokenized security as a security “formatted as or represented by a crypto asset”.
• US exemptions cap the size of some raises: Regulation CF at $5,000,000 in 12 months, Regulation A Tier 2 at $75,000,000; Regulation D 506(c) has no cap but sells only to verified accredited investors.
• The legal work is split between four licensed or specialist parties: securities counsel, a broker-dealer, a transfer agent to keep the register, and a KYC provider.
• The largest cost line is the offering documents: $50,000–$200,000+ at a law firm when the platform only mints the token, per the Stobox tokenization cost index.
• Tokenized real-world assets held $38.54B of distributed on-chain value on 26 September 2026, according to rwa.xyz.

What is a security token offering?

An STO is the moment a company or fund sells a security to investors and issues it as a token. The investor receives a claim written in legal documents (a share, a note, a fund interest) and a token that records it on a blockchain. The documents decide what the investor owns; the token keeps the record and enforces who may hold it.

Whether something is a security in the US is decided by the substance of the deal, not its label. The Supreme Court’s 1946 test in SEC v. W. J. Howey Co. looks at whether people invest money in a common enterprise and expect profits from the efforts of others. The SEC applied the same logic to token sales in its DAO report of 25 July 2017, which said the answer depends on the facts “regardless of the terminology or technology used”.

On 28 January 2026 three SEC divisions (Corporation Finance, Investment Management, Trading and Markets) published a staff statement on tokenized securities. It describes an issuer tokenizing its own security by integrating a blockchain into the system that records owners, the “master securityholder file”. The statement notes that it has no legal force and does not change the law. You may also see the term DSO (digital security offering); it means the same thing.

Security token or utility token?

A security token carries a financial claim: equity, repayment, distributions or a share of revenue. A utility token gives access to a product or network and carries no such claim. The label a project chooses does not settle the question; the economics do. The side-by-side is on security token vs utility token.

STO vs ICO vs IEO vs IPO

Two of these sell securities under securities law; two sold tokens that often turned out to be unregistered securities.

The detail behind each row is on STO vs ICO vs IEO, and the question of when a tokenized raise is an alternative to going public is on tokenization vs IPO. For how enforcement shaped the shift from ICOs to STOs, see the history of SEC enforcement against crypto.

How an STO works, step by step

An STO runs in the same order as a private placement; the token is issued where shares would otherwise enter a paper register. A typical sequence:

1. Get the company record in order. Cap table, title to the asset, financial statements and corporate approvals. Messy records are the most common reason an offering stalls, whoever drafts the documents.
2. Choose the structure. Tokenize the operating company’s shares, or hold the asset in a special-purpose vehicle (SPV) and tokenize the SPV. Entity formation runs from about $110 in Delaware to about $4,000 in Cayman (SPV playbook).
3. Pick the exemption. Reg D, Reg S, Reg CF or Reg A in the US; prospectus exemptions in the EU and UK. The exemption decides who may invest, how much can be raised and whether the offering can be advertised.
4. Prepare the offering documents. Private placement memorandum, subscription agreement, risk factors, use of proceeds, investor questionnaire and data room. Securities counsel reviews and signs off.
5. Configure the token. Choose the network and write the transfer rules: which wallets are eligible, holding periods, investor caps, and how lost keys and court orders are handled.
6. Run the offering. Investors pass KYC and, where required, accreditation checks; sign; pay; and receive tokens. A registered broker-dealer runs the sale where it is brokered.
7. File. For a Reg D offering, Form D is due no later than 15 calendar days after the first sale (17 CFR 230.503), plus state notice filings where they apply.
8. Maintain the register and report. Distributions, votes, investor updates and permitted transfers continue for the life of the security.

The Stobox Tokenization Framework breaks this path into 8 phases and 48 steps. A typical timeline is 3–6 months, most of it preparation rather than the token itself (tokenization timeline).

The legal work an STO needs, and who does it

Issuers looking for “STO legal services” usually want to know who writes the documents and who carries the licence. The work splits across several parties, and some of it only a licensed firm may do.

Is Stobox an STO law firm?

No. Stobox is not a law firm and gives no legal advice. What it does is prepare the offering documents: in a Stobox Raisable window the private placement memorandum, subscription agreement, Form D, investor questionnaire, risk factors and data room are drafted from the company’s own record, so every figure matches across documents. Your securities counsel then reviews a near-final package, signs off and is responsible for the filed documents. If you do not have counsel who has handled a tokenized security before, Stobox can introduce one, who works inside the project with a seat of their own.

The same split applies to the sale. Where an offering is brokered, it runs through a registered broker-dealer, and any success fee is charged by that firm, not by Stobox. Borys Pikalov, who co-wrote a 2019 book on STOs with Stobox Founder and CEO Gene Deyev, covers the legal side in more depth in this interview on the legal intricacies of RWA tokenization.

The US exemptions most STOs use

An individual is an accredited investor with net worth above $1,000,000 excluding the primary residence, or income above $200,000 ($300,000 jointly) in each of the last two years (17 CFR 230.501). Securities bought under Reg D are restricted: under Rule 144 a holder waits six months or one year, depending on whether the issuer reports to the SEC (17 CFR 230.144). The trade-offs are compared on Reg D vs Reg S vs Reg CF vs Reg A, and the full US picture is in the US tokenization guide.

How much does an STO cost?

The token is cheap. The offering documents and structuring are where the money goes, and the bill depends on whether your platform prepares them or leaves them to a law firm. The figures below are from the Stobox tokenization cost index (updated 11 September 2026); third-party ranges are typical 2026 ranges, not quotes.

On the index’s worked example, a $2M real-estate raise under Reg D 506(c) through a single US SPV costs about $50,000–$120,000 with a mint-only platform plus outside counsel, and about $10,000–$30,000 when the platform includes the documents. Stobox fees are flat and published on pricing; Stobox never charges a percentage of the raise.

The STO market in 2026

The market is now usually measured as tokenized real-world assets (RWAs) rather than STOs. On 26 September 2026 the rwa.xyz dashboard showed $38.54B in distributed asset value (tokens that can move on-chain), $358.13B in represented asset value, and 4,831,500 asset holders. In July 2026 the same distributed measure stood at $33.5B, as recorded in the Stobox State of RWA Tokenization 2026 report, which compiles third-party trackers with dates.

By that report’s segment table, tokenized US Treasuries and money-market funds were the largest category at $13.4–15.2B, private credit $8–18.9B depending on how it is counted, and tokenized equities $0.5–1B. Real estate, the asset most early STOs were built around, was estimated at $1–3B and is the hardest segment to measure, because most tokenized property is held as SPV interests.

The rules also moved. Besides the January 2026 SEC staff statement, the report records the SEC’s March 2026 approval of Nasdaq’s rule change to trade tokenized forms of listed securities, and ERC-7943 (uRWA) reaching Final status as Ethereum’s RWA standard in May 2026. Stobox is one of the standard’s backers and issues tokens primarily on Base with ERC-7943 transfer rules (ERC-7943 explained). For the earlier history of the STO market, see STO market history.

Choosing an STO development company

An “STO development company” can be a smart-contract shop or a full-service platform. Five questions separate them:

1. Who prepares the offering documents? If the answer is “your lawyer”, budget the $50,000–$200,000+ separately.
2. How is the fee set? Flat and published, or a percentage of the raise. A percentage belongs to the licensed broker-dealer, not the technology provider.
3. What does the platform claim to be? A technology provider that says it is also your broker, adviser or law firm should show the licence.
4. How are transfer rules enforced? On the token itself, against an eligibility list, with a documented process for lost keys and forced transfers (how that works).
5. What happens if the platform disappears? The investor’s rights should survive the vendor (what to check).

A longer checklist is in how to choose a tokenization platform. For context on who is answering: Stobox has worked with 100+ clients across 20+ jurisdictions since 2018, with $305M+ in assets structured and supported. Its Founder and CEO, Gene Deyev, co-authored with Borys Pikalov a book on STOs, How to Attract Investments with STO: A Practical Guide (2019).

What an STO does not change

Tokenization changes how ownership is recorded and transferred. It does not change the risk of the underlying business or asset, and it does not create buyers.

• Liquidity is not automatic. Restricted securities stay restricted: Rule 144 holding periods and exemption limits apply to tokens as they do to paper shares. Secondary trading needs a regulated venue and willing buyers (security token liquidity).
• Issuer risk stays. If the company or asset underperforms, the token reflects it.
• Smart-contract and key risk is new. Code needs audit, and lost keys need a recovery process written into the documents.
• Regulation differs by country. An exemption that works in the US may not work in the EU or UK; each market needs its own route.

Common failure points are collected in why tokenization projects fail.

Questions, answered

What is an STO in simple terms?

An STO is a sale of securities, such as shares or debt, where each investor’s holding is recorded as a token on a blockchain. It follows securities law like any other private placement or public offering. The token keeps the ownership record and enforces who may hold and transfer it.

Is an STO legal in the United States?

Yes, when it is registered with the SEC or sold under an exemption such as Regulation D, Regulation S, Regulation CF or Regulation A. The SEC staff statement of 28 January 2026 treats tokenized securities as securities, so the usual rules on disclosure, investor eligibility, broker registration and resale restrictions apply.

What is the difference between an STO and an ICO?

An STO sells a security with rights written in offering documents, to verified eligible investors, under securities law. A 2017-era ICO usually sold a new token with no enforceable claim to anyone with a wallet. The SEC’s 2017 DAO report said token sales can be securities offerings regardless of the technology used, which is why many ICOs later faced enforcement.

Do I need a lawyer for an STO?

Yes. Securities counsel should confirm the exemption, review the offering documents and sign off on what is filed. A platform can prepare the document package, which reduces the hours counsel bills, but the legal judgment and responsibility stay with your lawyer. Stobox is not a law firm and works alongside your counsel.

How long does an STO take?

A typical timeline is 3–6 months from a clean company record to closing. Most of that time goes on structuring, documents and investor onboarding, not on issuing the token. A company with a reconciled cap table and clear title moves faster.

How much does it cost to launch an STO?

With a mint-only platform, the offering documents alone typically cost $50,000–$200,000+ at a law firm. With Stobox, a Raisable window of $1,499–$6,999 includes the document package, and going fully on-chain costs $1,248. Entity formation, any appraisal, KYC at $2–$8 per investor and a broker-dealer’s commission on a brokered raise come on top either way.

Can security tokens be traded after the offering?

Only within the rules of the exemption and on venues allowed to trade securities. Reg D securities are restricted, and Rule 144 sets a holding period of six months or one year before resale. After that, trading depends on a regulated venue and on demand, which is thinner than on public exchanges.

An STO is a securities offering with a better register, and the hard part is the preparation, not the token. If you want to know how ready your company or asset is for one, score your asset: twenty-five questions, about eight minutes, and nobody calls you unless you ask.