Robinhood’s crypto business is next target in US crackdown, filing reveals

Robinhood’s crypto business is next target in US crackdown, filing reveals
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Robinhood's crypto business is just the latest to garner attention from the US securities watchdog. Credit: Shutterstock / Sergei Elagin
  • Robinhood could pay civil penalties.
  • The SEC targeted Coinbase, ConsenSys, and Uniswap.

The SEC added another company to its list of crypto targets, this time taking aim at the popular stock trading app Robinhood.

Robinhood’s 8-K filing filed on May 4 revealed that it had received a Wells Notice, in which the SEC staff recommended the commission file an enforcement action against Robinhood’s crypto business, alleging securities violations.

The potential action could see Robinhood issued with a cease-and-desist order and pay civil penalties.

Dan Gallagher, Robinhood’s chief legal officer, said in a post they were “disappointed” by the SEC’s move despite “years of good faith attempts” to work with the Commission.

“We firmly believe that the assets listed on our platform are not securities,” he said.

The firm behind the popular stock and crypto trading app was issued a subpoena in February 2023. The subpoena was related to Robinhood’s platform operations, crypto listings, and how it held user funds.

Along with trading stocks like Tesla and Google, Robinhood lets users trade Dogecoin, Ethereum, Bitcoin, and other cryptocurrencies. The firm launched a bespoke digital wallet to hold cryptocurrencies in 2023. At the end of last year, it had nearly 11 million monthly users.

Gary versus crypto

The SEC, led by its anti-crypto chair Gary Gensler, has been on a warpath, swatting crypto firms with similar allegations.

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The Commission is embroiled in a legal battle with the United States’ largest crypto exchange, Coinbase. The SEC alleges Coinbase operated as an unregistered securities broker by listing different cryptocurrencies.

Gensler and his staff have also taken on one of DeFi’s stalwarts.

Earlier this year, the SEC notified Uniswap via a Well Notice that it would also bring charges. The company that built the popular decentralised exchange has vowed to battle the SEC over its allegations.

As it exists today, argues Gensler, the majority of cryptocurrencies, excluding Bitcoin, are unregistered securities.

They, like entities issuing stocks and bonds, must meet regulatory requirements.

Crypto projects have chafed at the suggestion, arguing that digital assets deserve tailor-made regulations.

Liam Kelly is DL News’ Berlin correspondent. Contact him at liam@dlnews.com.