- Robinhood CEO Vlad Tenev criticized the “regulatory onslaught” on crypto by the SEC and vowed to fight back against potential enforcement action.
- Robinhood Crypto received a Wells Notice from the SEC, indicating that the agency could take enforcement action related to Robinhood’s crypto token listings and custody practices.
- While aiming for a “safety-first” approach, Robinhood has faced regulatory issues before, including penalties from New York’s financial regulator and settlements with the SEC over misleading statements.
Robinhood CEO Vlad Tenev has blasted the wave of enforcement action notices from the Securities and Exchange Commission (SEC), becoming the latest power player on Wall Street to do so. The retail trading platform disclosed on Friday that it had received a Wells Notice from the SEC, putting Robinhood Crypto on notice that an enforcement action could be coming.
Robinhood Receives Wells Notice from SEC
Robinhood Crypto said the agency had previously scrutinized its token listings and crypto custody practices in a filing. Tenev said in a Twitter post on Monday that the “SEC’s continued attack on crypto” coupled with recent rule proposals “mark yet another improper attempt by the administrative state to stifle innovation.”
Robinhood Takes Conservative Approach
Robinhood Crypto finds itself as a distinct target in the SEC’s crosshairs. Robinhood isn’t a crypto-native company, but began offering investors Bitcoin and Ethereum through its app in 2018. Over the years it has also claimed to grow those offerings cautiously through its crypto arm. Testifying before lawmakers last year, Robinhood Markets Chief Legal Compliance and Corporate Affairs Officer Dan Gallagher said the firm’s choices are motivated by a “safety-first approach.”
That includes a conscious choice not to offer customers products involving crypto lending or staking, where investors can delegate tokens to a network and receive rewards. “Unlike some of our competitors that have grown quickly and list hundreds of digital assets on their platform, Robinhood Crypto has taken a more conservative approach,” Gallagher said.
Robinhood Removes Some Crypto Offerings
After the SEC sued Binance and Coinbase last year, however, Robinhood Crypto moved to end support for tokens the SEC claimed to be securities. The firm’s US users lost access to trading altcoins such as Cardano (ADA), Polygon (MATIC) and Solana (SOL) in a few weeks.
Robinhood Has Regulatory History
Robinhood Crypto has encountered regulatory hurdles before. Penalized by the New York Department of Financial Services in 2022, the company paid $30 million to settle charges over alleged compliance failures regarding its cybersecurity and transaction monitoring practices.
On top of that, Robinhood agreed to pay $65 million in 2020 to settle charges brought by the SEC over misleading statements allegedly made to investors. Then in 2021, the Financial Industry Regulatory Authority ordered Robinhood to pay a $70 million fine over “widespread and significant harm suffered by customers”—levying its largest-ever financial penalty.
Robinhood Ready to Fight SEC
Nonetheless, Tenev said on Twitter Monday that Robinhood Crypto isn’t afraid of a court battle with Wall Street’s top regulator. He said that while the company strives to maintain positive relationships with regulators, “if necessary, we will use our resources to contest this matter in the courts.”
Conclusion
Robinhood Crypto is the latest crypto company to be targeted by the SEC’s ongoing crackdown. While Robinhood has taken a conservative approach with crypto offerings compared to some competitors, the SEC still sees issues with its business. Robinhood appears ready to fight any enforcement action in court if needed, but the SEC’s aggressive stance could lead to a drawn-out legal battle.
