An SEC No-Action Letter Lets Franklin's Tokenized Shares Into Ordinary Funds

Franklin Templeton's ordinary mutual funds and ETFs now have a route to holding tokenized shares. In a no-action letter to the firm, the SEC's Division of Investment Management said it would not recommend enforcement if traditional Franklin funds put cash into the Franklin OnChain U.S. Government Money Fund, the tokenized money-market vehicle known as BENJI. The relief covers two uses: day-to-day cash management and collateral for securities lending, the practice of lending out portfolio holdings for a fee. Bloomberg reported the letter on Thursday. Franklin sees a possible rollout from the fourth quarter of 2026, once each fund's board signs off.

What the staff cleared, and what it did not

A no-action letter is staff relief, not a rule — an assurance that the division will not recommend enforcement over the arrangement described, and nothing beyond it. This one is explicit on the point. According to the accounts published Thursday by Bloomberg, Crypto Briefing and CoinGape, the letter states that it "does not constitute Commission approval." The Commission voted on nothing here. Franklin asked, and the staff answered. Staff positions can also be narrowed or withdrawn later, where a rule would need a Commission vote to change.

BENJI is Franklin's tokenized government money-market suite, running primarily on the Stellar blockchain, with $1.98 billion under management as of late April, the most recent figure in this week's coverage. The relief changes nothing about what BENJI itself holds; it changes who may hold BENJI. Sandy Kaul, who leads Franklin's digital assets and innovation arm, framed the clearance as a treasury upgrade for the funds doing the buying.

Funds can "manage cash more precisely, capture more yield and reduce the amount of liquidity they need to hold," Kaul said.

Dated the 12th, public on the 20th

The letter is dated 12 August. Coverage arrived eight days later. Bloomberg published first, on Thursday the 20th; Crypto Briefing and CoinGape carried the story the same day, and crypto.news filed its account on Friday. None of the four explains the gap, and we could not establish who made the document public or when. For anyone tracking the file, the operative date is the 12th, not the day the headlines ran.

Which way the bridge runs

Most tokenized fund-share news this year has run in one direction: asset managers wrapping conventional exposure for on-chain buyers. BlackRock launched two tokenized funds across three chains at the start of the month, and the shelf of tokenized wrappers has kept growing since. The Franklin letter points the other way. It treats a tokenized share as something an ordinary registered fund can hold, first as a cash sleeve, then as collateral it can post. If boards adopt the sleeve, the buyers of tokenized fund shares stop being a crypto-native audience and start including the product line of a manager with about $1.5 trillion under management. For the asset class, that is a new category of holder entirely.

Board votes come first

The relief is Franklin-specific. It covers Franklin funds buying BENJI, on the terms Franklin described, and nothing wider. A rollout could begin in the fourth quarter of 2026, per Thursday's coverage, and only for funds whose boards approve it. The fourth-quarter date is Franklin's, not the SEC's. How many boards say yes, and how much cash they route through the tokenized fund, are numbers the letter cannot supply. What it does supply is a precedent that other managers can cite when they draft requests of their own.