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Robinhood may face SEC scrutiny for its cryptocurrency business in the United States
Key points
- Online trading platform Robinhood said Monday that it has received a Wells Notice from the SEC recommending enforcement against the company’s cryptocurrency platform.
- The SEC had previously taken similar actions against Coinbase and Kraken for failing to register as broker-dealers and selling crypto tokens considered unregistered securities.
- Robinhood said it cooperated with the agency’s investigation and had already received subpoenas, and promised that its crypto platform is “here to stay.”
Robinhood Markets (HOOD) said he may face enforcement action from Securities and Exchange Commission (SEC) linked to its cryptocurrency business. The online trading platform revealed that it had received a Wells Notice by the regulator in an SEC filing on Monday.
The regulator has accelerated its repression of the cryptocurrency sector in the last year. This latest notice to Robinhood could likely be a precursor to similar actions taken by the regulator against Coinbase (CURRENCY) and Kraken last year.
What the Wells Notification Means for Robinhood
A Wells Notice informs an individual or company of a completed SEC investigation and notifies them of potential or probable enforcement actions. Robinhood said the notice it received indicated that the recommendation after the SEC’s investigation was “that the Commission file an enforcement action.”
Enforcement could include seeking an injunction or cease and desist actions against Robinhood’s cryptocurrency business, sanctions, “censorship, revocation and activity restrictions,” among others.
The trading platform said it cooperated with previously received subpoenas related to, among other things, its “cryptocurrency listings, cryptocurrency custody and platform operations.”
This sounds similar to the SEC’s actions against other cryptocurrency trading platforms like Coinbase and Kraken for the sale of cryptographic tokens the SEC considers 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 the sale of crypto securities, something the SEC is also investigating Robinhood.
“After years of good faith attempts to work with the SEC to obtain regulatory clarity, including our notorious ‘go in and register’ effort, we are disappointed that the agency has decided to issue a Wells Alert regarding our cryptocurrency business in the United States.” Dan Gallagher, Robinhood’s chief legal officer, said this.
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 working with the SEC to clarify 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 Monday, but rebounded after the opening bell to rise 0.7% to $18.07 as of 11:50 a.m. ET. The company will report first-quarter results on Wednesday.