According to Woofun AI, a fierce conflict erupted between AMC Entertainment (AMC.US) CEO Adam Aron and Robinhood (HOOD.US) founder Vlad Tenev over the legitimacy of tokenized shares, during which the price of AMC Entertainment (AMC.US) tokens on the Robinhood (HOOD.US) chain once surged ninefold, exposing the core flaw of the current market's lack of an effective arbitrage mechanism.

During the seven trading sessions from August 31 to September 9, the median deviation between the closing price of Robinhood (HOOD.US) AMC Entertainment (AMC.US) tokens and the closing price of the underlying stock on the NYSE was 0.87%, with a maximum deviation of 2.71%, based on measurements from the Uniswap pool on Robinhood (HOOD.US) Chain. However, when the underlying U.S. stock market was closed, the price discovery mechanism completely failed. Near midnight on Thursday, September 3, the token price spiked sharply from $2.55 to $23.16, roughly nine times the NYSE closing price of $2.54 about seven hours earlier, before falling back to $3.26 within the same hour, during which the pool's trading volume was approximately $10.5 million.

Theoretically, such a massive price gap should attract high-frequency traders and market makers to arbitrage and eliminate the discrepancy, but the actual situation was far different. The Jersey-based issuer designated only one authorized participant responsible for token creation and redemption. Although the surge occurred during a period when creation and redemption were permitted, this participant did not execute any minting or burning operations. Woofun AI on-chain data shows that on Friday, September 4, there were 47 minting records throughout the day, all concentrated between noon and 7 PM Eastern Time, when the cash market was trading, half a day after the token's de-pegging and recovery. This indicates that during after-hours sessions, there was a lack of effective arbitrage infrastructure to correct price deviations.

In a normal financial market structure, dealers can absorb premiums by short selling or drawing on their own inventory, then replenishing their positions later. But in Robinhood (HOOD.US)'s case, due to the lack of borrowing infrastructure, the only way to obtain new tokens is to prepay the issuer, which means the underlying stock must first be purchased. If the NYSE has already closed, the broker should have completed the purchase before the close, but this requires committing substantial capital to hedge exposure, and the premium ceiling is limited by the depth of the on-chain pool, which is essentially a proprietary bet rather than risk-free arbitrage. For the issuer, minting tokens without corresponding shares means owing shares on the books that have not yet been purchased, bearing the risk until the market opens, which is unacceptable for an instrument branded as "fully collateralized." Therefore, the selling pressure that ultimately pushed the price back to normal levels actually came from token holders taking profits, with funds circulating only within the token market and no real stock changing hands.

The deeper problem is that such price volatility is unrelated to the fundamentals of AMC Entertainment (AMC.US) stock. Hours after Adam Aron's post, a meme coin denominated in tokenized AMC Entertainment (AMC.US) appeared on the market. As demand for the meme coin rose, the trading pool sold AMC Entertainment (AMC.US) tokens to buy the meme coin, thereby dragging down the stock token's price. An instrument that should be anchored to a cinema company's shares saw its price driven by speculative demand unrelated to the underlying stock, causing all downstream users referencing that price to receive distorted data.

To limit the impact of on-chain dislocation on the underlying stock, the SEC has capped on-chain trading volume at 0.25% of the average daily trading volume for large-cap stocks and 2.5% for other listed companies, but offshore wrapped tokens offered to non-U.S. holders, including Robinhood (HOOD.US)'s product, fall outside SEC jurisdiction and continue to operate under the original model. Wrapped tokens have significant advantages in reaching emerging markets, particularly in regions where access to U.S. stocks is restricted or costly. Robinhood (HOOD.US)'s stock tokens have already covered 120 countries and more than 190 companies, while xStocks and Ondo also provide similar services through different channels. Outside the United States, this model requires no issuer consent, no entry into the shareholder register, and no market-by-market authorization, which is precisely the source of its reach, but it is also the source of the counterparty risk borne by holders. Wrapped tokens trade distribution breadth at the cost of potential price dislocation, gaps in investor rights, and insufficient issuer transparency.

This constraint is not caused solely by Robinhood (HOOD.US)'s schedule or one issuer's arrangements. Price discovery does not stop when the NYSE or Nasdaq closes; many brokers still accept orders outside U.S. stock market hours and use overnight venues and derivatives to hedge. However, when the major exchanges are closed, the ability to find the underlying stock at scale drops sharply. Holders hold a claim but can essentially only complete conversions during the 32.5 regular hours out of the NYSE's 168 hours per week; during off-hours, the premium of the token relative to the stock's previous close is borne by buyers themselves, and they pay the price when it converges at the open. The issuer-sponsored token (IST) model instead tokenizes the registered shares themselves, with the issuer and transfer agent directly participating in trading. In addition to the 7×24 trading and programmability of wrapped tokens, IST is the security itself, carrying voting rights and corporate action rights. This changes the risk structure borne by market makers. When quoting a wrapped token at 3 AM, the inventory is a claim on shares, lacking a real-time price anchor; when quoting IST, the inventory is the security itself, and a trade is a stock transaction. Although the order book at 3 AM remains thin, it eliminates the conversion risk and intermediary counterparty risk between the two instruments. However, IST cannot obtain reach beyond the regulatory perimeter, which is precisely the advantage of wrapped tokens. The distribution power of wrapping comes from "another, lighter regime," while the integrity of IST comes from "it is the underlying stock." Currently IST remains relatively scarce, with only a few names trading, including Bullish (BLSH.US)'s BLSH, and liquidity is thin. The 3 AM trading environment highlights the fundamental differences between the two models in risk taking and rights integrity; IST offers purer price discovery but sacrifices some market breadth.

The core of the AMC Entertainment (AMC.US) dispute revolves around "who is allowed to issue stock tokens on-chain," but the more critical question is how to build complete market infrastructure. The depth of the wrapped market is constrained by the conversion gate between two instruments and two clocks, and IST can remove that gate. With the right infrastructure, true price discovery could be completed at any time and at any licensed venue by authorized participants, rather than relying on a handful of designated institutions. Issuer-sponsored tokens serve regulated markets, while wrapped tokens provide risk exposure to users outside the perimeter; the two can run in parallel for mutual benefit. The wrapped market can gain the real-time price anchor and market-maker arbitrage tools it most lacks in the dead of night, while the issuer-sponsored market can gain arbitrage flow from using tokens as inventory to make markets in the wrapped market. If IST is used as collateral for wrapped tokens, creation and redemption would fall onto the same track, enabling second-level settlement without relying on the cash market to find shares, so that the two sides are no longer split markets but components of the same infrastructure serving different scenarios. Future discussion should focus on how to compress the spreads faced by 3 AM traders, shorten conversion times between different instruments, clear continuous markets, and who will build the infrastructure in between. No single company can build all the infrastructure alone; exchanges, brokers, asset managers, market makers, transfer agents, and clearinghouses each hold one link, and industry organizations such as the IST Alliance aim to bring these participants together to jointly build a mature market ecosystem.