Markets
Robinhood Could Face SEC Scrutiny Over Its US Crypto Business
Key Takeaways
- Online trading platform Robinhood said Monday it received a notice from Wells from the SEC recommending enforcement of the company’s cryptocurrency platform.
- The SEC has already taken similar actions against Coinbase and Kraken for failing to register as brokers and selling crypto tokens considered unregistered securities.
- Robinhood said it has cooperated with the agency’s investigations and previously received subpoenas, and promised that its crypto platform is “here to stay.”
Robinhood Markets (HOOD) said he could face coercive actions from Securities and Exchange Commission (SEC) related to your cryptocurrency business. The online trading platform disclosed that it received a Wells Notice from the regulator in an SEC filing on Monday.
The regulator increased until its repression of the cryptocurrency industry last year. This latest warning to Robinhood could likely be a precursor to similar actions the regulator has taken against Coinbase (COIN) and Kraken last year.
What Wells’ warning means for Robinhood
A Wells Notice informs an individual or company of a completed SEC investigation and notifies them of potential or likely enforcement actions. Robinhood said the notice it received indicated that the recommendation following the SEC investigation was “that the Commission take enforcement action.”
Enforcement may include seeking an injunction or cease and desist actions against Robinhood’s crypto business, penalties, “censorship, revocation, and activity limitations,” among others.
The trading platform said it has cooperated with previously received subpoenas related to its “cryptocurrency listings, cryptocurrency custody and platform operations,” among other things.
This sounds similar to the SEC’s actions against other cryptocurrency trading platforms such as Coinbase and Kraken for the sale of cryptographic tokens, the SEC considers them to be unregistered securities.
While Coinbase and Kraken are also exchanges, the SEC’s allegations also included the two entities’ failure to register as broker-dealers for selling crypto securities – something the SEC is also investigating on Robinhood.
“After years of good faith attempts to work with the SEC to achieve regulatory clarity, including our well-known ‘go and register’ attempt, we are disappointed that the agency has decided to issue a Wells Notice related to our crypto business in the US,” Robinhood Chief Legal Officer Dan Gallagher said.
Robinhood Says Crypto Platform Is “Here to Stay”
“We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear how weak any case against Robinhood Crypto would be on both the facts and the law,” Gallagher said.
The company also said that its crypto platform is “here to stay” and that it “will continue to innovate, ship products and fight for regulatory clarity for the good of the industry and our customers.”
Robinhood shares fell before markets opened on Monday but recovered after the opening bell, rising 0.7% to $18.07 at 11:50 a.m. ET. The company reports first-quarter results on Wednesday.