Robinhood Served With SEC Crypto Enforcement Notice

Retail stock trading platform Robinhood Markets said it has been served with a notice from the US Securities and Exchange Commission (SEC) over alleged securities violations regarding cryptocurrencies supported on its crypto trading platform.

In an 8-K filing Robinhood, known for the part it played in helping traders drive up the price of meme stock GameStop, said it has received a so-called Wells notice from the SEC’s staff recommending the agency take action.

Coinbase received a similar notice months before the SEC sued it last summer in a landmark case in which it alleged a number of popular cryptocurrencies are securities. The SEC sued Binance on similar charges.

Robinhood said it received the Wells notice after cooperating with the SEC inquiries about its crypto listings, custody of cryptocurrencies and the operations of the Robinhood Crypto platform.

Enforcement notice

The SEC’s actions following the Wells notice could include an injunction, a cease-and-desist order, disgorgement, limits on activities and/or civil penalties.

“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,” said Robinhood chief legal officer Dan Gallagher in a statement.

The company said it previously made the “difficult choice” to delist certain tokens, including Solana, Polygon and Cardano, after the SEC named those tokens as securities in its lawsuits against Binance and Coinbase.

When it delisted the tokens last year Robinhood said the SEC’s move had “introduced a cloud of uncertainty around these assets, and as a result, our team has decided to end support for them”.

Crypto controversy

The SEC argues most cryptocurrency tokens are securities and are subject to its rules on registration, while crypto firms say it is overreaching.

In its lawsuit last year the SEC said Coinbase facilitated trading of at least 13 crypto tokens that should have been registered as securities and as such was operating illegally as a national securities exchange, broker and clearing agency.