Robinhood disclosed that it received a subpoena from the SEC in December 2022 requesting information about its cryptocurrency listings, cryptocurrency custody, and platform operations.
Robinhood, the popular trading app, has disclosed in his recent 10-K filing, he received a subpoena from the Securities and Exchange Commission (SEC) in December 2022.
The subpoena requested information about Robinhood’s cryptocurrency listings, cryptocurrency custody, and platform operations.
The subpoena comes after a turbulent year in the cryptocurrency market, with several major trading platforms and lending platforms filing for bankruptcy, including FTX and Three Arrows Capital. Robinhood’s stock price was also impacted in November 2022, dropping 18% the day FTX halted all non-fiat customer withdrawals from its platform.
Robinhood’s policies and procedures are designed to assess the likelihood that a particular cryptocurrency may be considered a security under applicable laws. However, the company said these assessments are not final legal determinations, which makes it vulnerable to legal or regulatory action if a cryptocurrency supported by its platform is considered a security under the American law.
If the SEC or a court determines that all cryptocurrencies supported by Robinhood’s platform are securities, the company could be prevented from facilitating trade in those cryptocurrencies.
It remains to be seen how this subpoena will affect Robinhood’s cryptocurrency business, but it serves as a reminder of the regulatory risks involved in the rapidly changing and evolving crypto market.
This is far from being the company’s first collision with the dreaded regulator. In late 2020, the SEC accused Robinhood Financial of repeatedly misrepresenting and failing to disclose receipt of payments from trading companies to route customer orders to them. The SEC alleges Robinhood misled customers between 2015 and late 2018 in communications about its biggest source of revenue. Robinhood agreed to pay $65 million to settle the charges without admitting or denying the SEC’s findings.
After cashing in on the Dogecoin craze in 2021, Robinhood has significantly expanded the list of cryptocurrencies available on its platforms.