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Robinhood Would Likely Win Crypto Court Case With SEC: KBW
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The SEC issuing Robinhood a Wells Notice is surprising, KBW said.
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The broker does not anticipate any changes to the platform’s current US crypto operations or asset listings.
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Robinhood is more likely to win a case with the SEC than most of its US competitors, the report says.
The fact that Robinhood (HOOD) has been issued a Wells Notice by the Securities and Exchange Commission (SEC) is surprising given the company’s very conservative approach to digital asset listings, KBW said in a research report on Monday.
KBW notes that Robinhood offers only fifteen cryptocurrencies on its US platform, while some of its competitors offer more than two hundred digital assets.
“We do not expect any changes in HOOD’s current crypto operations or asset listings in the United States – and we expect the SEC to file a lawsuit in the coming months,” wrote analysts led by Kyle Voigt.
“Our preliminary view is that HOOD would likely fight the SEC in court and is more likely to prevail than most U.S. competitors (if placed in similar situations) given HOOD’s more stringent listing standards,” the authors wrote.
Cryptocurrency trading accounts for 12% of Robinhood’s revenue, the report says, and KBW assumes the SEC will likely pursue a subset of digital assets on the platform.
“The worst-case scenario from a revenue-at-risk perspective is if the SEC chooses to proceed with classifying ether {{ETH}} as a security, as it likely makes up around 25% of HOOD’s crypto assets/trading,” report added .
The brokerage has a market outperform on the stock with a price target of $20. Shares were trading 1.3% higher at around $18 on Tuesday.
KBW said Robinhood shareholders won’t have full clarity on the outcome of a potential legal case until at least the end of 2025, citing the regulator’s ongoing case against cryptocurrency exchange Coinbase (COIN).
To know more: Robinhood gains 2%, erasing early losses following SEC Wells warning