Tokenized stocks expand global access but ownership risks remain, Zoth CEO says

As crypto exchanges expand their tokenized stock offerings, Zoth founder and CEO Pritam Dutta has raised concerns about whether investors understand the ownership rights and protections attached to these products.

Dutta said tokenization is opening access to US equities for investors in countries such as Nigeria and the Philippines, where purchasing shares in companies like Apple, Nvidia and other major US technology firms can be difficult.

However, he warned that many tokenized stock products provide price exposure rather than direct share ownership, leaving investors without voting rights and making dividend payments dependent on platform terms.

“For someone in Nigeria or the Philippines, where this might be their only way into US stocks, that matters, and too few platforms are being upfront about it,” Dutta said.

“Before anyone buys, they should ask three simple questions. Who holds the real share? What happens to my dividends? What happens if the platform fails?”

In written responses to Crypto Briefing, Dutta addressed those questions using Zoth’s zMAG7 product, which provides exposure to seven US technology companies through Coinbase Tokenized Stocks on Base.

The basket allocates approximately 14.3% each to Apple, Amazon, Nvidia, Alphabet, Meta, Microsoft and Tesla, with investments starting at $1 for eligible investors outside the US.

According to Dutta, each underlying token is backed by a real US listed share held by Alpaca Securities, an SEC registered broker dealer, in a segregated account designed to protect the assets from the issuer’s creditors.

Coinbase Onchain SPV Ltd issues the tokens from Abu Dhabi Global Market under the Financial Services Regulatory Authority, with each token representing a beneficial interest in the underlying share.

On dividends, Dutta explained that Coinbase Tokenized Stocks follow a reinvestment model, automatically using distributions to purchase additional underlying shares. The reinvestment is reflected through an onchain multiplier, increasing the redeemable value of each token without changing the holder’s token balance. Stock splits follow the same mechanism.

Regarding platform failure, Dutta said the underlying shares remain segregated at Alpaca Securities. He added that zMAG7 uses a security arrangement requiring approval from three of five keyholders, with continuous monitoring provided by Blockaid and Mitigata.

Investors hold zMAG7 directly in their wallets on Base and can redeem their positions for stablecoins within two business days, according to Dutta. The underlying tokens also have publicly accessible contract addresses, allowing investors to inspect the basket’s holdings.

However, Dutta did not specify whether token holders would be treated as secured or unsecured creditors in an insolvency proceeding or identify a legal precedent establishing their claims.

“The demand is real. The question is whether people are being sold what they think they’re buying,” Dutta said.