SEC targets Robinhood for alleged securities law breaches
Robinhood disputes SEC's claims, asserts crypto assets are not securities.
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Robinhood Crypto, the digital asset division of Robinhood Markets, has been served with a Wells Notice by the US Securities and Exchange Commission (SEC), as revealed in an 8K disclosure on Monday.
The notice, issued on May 4, suggests that the SEC staff is considering enforcement action against Robinhood’s crypto arm for possible violations of the Securities Exchange Act, which relates to securities exchanges’ registration requirements and rules governing clearing agencies.
Dan Gallagher, Robinhood’s chief legal and compliance officer, expressed disappointment that their efforts to cooperate with the federal agency didn’t pay off.
“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 US crypto business,” Gallagher stated.
Gallagher is confident Robinhood can ultimately prove their crypto listings are compliant and the cryptos they offer are not securities.
“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,” he added.
The latest development follows a series of Wells Notices issued by the SEC to crypto-related businesses, including Uniswap Labs last month.
Consensys, the developer of MetaMask, also reportedly received a Wells Notice from the agency, along with several subpoenas. The company filed a lawsuit against the SEC in April, alleging the agency of regulatory overreach.
Robinhood has long been under scrutiny for its crypto offerings. According to a 2022 filing with the SEC, the company, along with its CEO Vladimir Tenev, received subpoenas and information requests from various government agencies, including the SEC. This likely stems from the “Early 2021 Trading Restrictions” Robinhood implemented, which may have also impacted their crypto products.
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