FinTech News
Robinhood Receives Wells Notice From SEC Regarding Crypto
The FinTech brokerage firm Robinhood has announced that it’s received a Wells Notice from the Securities and Exchange Commission regarding its cryptocurrency features.
About the notice and Robinhood’s response:
In a filing, Robinhood revealed that the SEC has notified the company that it will recommend that the agency file an enforcement action, alleging securities violations. Furthermore, they note that these potential actions could involve a civil injunctive action, public administrative proceedings, a cease-and-desist proceeding, and more. The FinTech states that it is cooperating with the Commission.
As Robinhood notes in a blog post on the matter, the platform does not offer products such as lending or staking. Additionally, last year, the company made the decision to delist three crypto assets after the coins were cited by the SEC as alleged securities. These assets include Cardano (ADA), Polygon (MATIC), and Solana (SOL). Robinhood also says that it has attempted to register as a special purpose broker-dealer with the SEC.
What they’re saying:
Commenting on the SEC’s warning and Robinhood’s efforts so far, the firm’s Chief Legal, Compliance and Corporate Affairs Officer Dan Gallagher stated, “After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business. 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 just how weak any case against Robinhood Crypto would be on both the facts and the law.”
My thoughts:
This certainly isn’t the first time that Robinhood has found itself in some hot water. As many will recall, past controversies include them asserting that their planned checking account would fall under Securities Investor Protection Corporation (SIPC) insurance — which it didn’t — and, of course, the incident where the platform halted trading for certain “meme” stocks, such as GameStop amid a short squeeze. Yet, while those missteps were largely of their own making, this latest issue doesn’t strike me as being their fault. After all, they’re far from the only platform that supports crypto trading, with the likes of PayPal, Cash App, and several others doing the same. Plus, as Robinhood states, they’ve never offered crypto lending or staking.
Of course, at this point, we’re really only hearing Robinhood’s side of the story. Thus, I’ll reserve judgment until the SEC (presumably) releases its full case. In the meantime, Robinhood’s earnings will be released on Wednesday — so that call just got a lot more interesting.
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