- tZERO has accused Securitize of infringing patents covering tokenized securities infrastructure and sent a cease-and-desist letter.
- Securitize responded Monday by filing suit in federal court seeking a ruling that it does not infringe upon Securitize's patents.
- The dispute emerges as Wall Street ramps up efforts to tokenize stocks, bonds and investment funds, a market that some forecasts estimate could reach trillions of dollars.
Two of the biggest companies in the tokenization space are heading toward a legal showdown over intellectual property just as the industry they helped create begins to seriously court institutional investors on Wall Street.
Securitize said Monday it filed a lawsuit in the U.S. District Court in Delaware seeking a declaratory judgment that it does not infringe patents owned by rival tokenization firm tZERO.
The move came a week after tZERO sent Securitize a cease-and-desist letter accusing the firm of violating several patents related to blockchain-based securities infrastructure.
Tokenization — the process by which the ownership rights of real-world assets like stocks, bonds or real estate can be converted into tokens on a blockchain — is one of the fastest-growing areas in the digital assets space.
Global banks, exchanges and asset managers — including BlackRock, JPMorgan, Nasdaq, NYSE, to name a few — have increasingly embraced tokenization. Proponents argue the process can modernize capital markets by streamlining issuance, settlement and ownership tracking.
Market forecasts have ballooned in recent years. Citi has estimated tokenized assets could reach a $5 trillion market capitalization by 2030, while a report from Boston Consulting Group and Ripple projected a market worth $18.9 trillion by 2033.
Patent battle over tokenization infrastructure
At the center of the dispute are patents covering compliance systems for tokenized securities, digital asset issuance and redemption technology and blockchain-based trading infrastructure.
tZERO said its investigation concluded that products including Securitize's DS Protocol and Vault Registrar infringe patents covering self-enforcing compliance controls for security tokens and crypto integration systems.
The company said it is also investigating potential infringement by at least six other firms across tokenization, institutional crypto infrastructure and decentralized finance.
Securitize rejected the claims.
"tZERO's allegations are without merit and run counter to the spirit of fair play that defines our industry at its best," the company said in a statement posted on X.
Early pioneers clash amid growing stakes
The dispute pits two pioneers of tokenization against each other.
tZERO launched in 2014 and has spent more than a decade building technology for regulated digital asset markets and says it holds 105 patents globally across 23 patent families related to tokenized capital markets. NYSE parent Intercontinental Exchange made a strategic investment in the company in 2022, and tZERO unveiled plans last year to go public.
Securitize, founded in 2017, has become one of the leading providers of infrastructure for tokenized funds and securities, working with firms including BlackRock, Apollo, KKR, Hamilton Lane and VanEck. Earlier this year, the company announced a deal with the New York Stock Exchange (NYSE) to develop infrastructure for tokenized equities trading. The firm aims to go public later this year through a merger with a Cantor-backed entity.
