Key takeaways:
- Robinhood’s cryptocurrency business is about to face legal action from the US SEC.
- The agency has filed numerous lawsuits against various cryptocurrency sites as a result of that strategy.
Robinhood’s cryptocurrency business is about to face legal action from the US Securities and Exchange Commission (SEC). The organization informed Robinhood of upcoming enforcement action against them by sending a Wells Notice to the business.
The SEC issued investigative subpoenas to Robinhood regarding listings, custody, and operations of digital assets. The business acknowledged that it had cooperated with these inquiries to the best of its ability. Following this, on May 4, 2024, the Wells Notice was released.
It is indisputable that the digital asset market and the SEC have faced criticism in recent years. The business community has been working to support and comply with more regulations in the US during the past few years. Nonetheless, they are compelled to abide by the agency’s rules utilizing an enforcement strategy.
The agency has filed numerous lawsuits against various cryptocurrency sites as a result of that strategy. Another has joined the list; Robinhood’s cryptocurrency company is about to face legal action from the SEC.
In particular, the SEC sent the business a Wells Notice at the beginning of May. The letter then serves as notice that the agency is going to take enforcement action. But before the Wells Notice was released, the SEC had issued investigative subpoenas to Robinhood, which is why it was there.
According to the notice, the agency has recommended an enforcement action against Robinhood based on a “preliminary determination.” This action is specifically brought in response to claims of the Securities Exchange Act of 1934 violations.
According to Dan Gallagher, chief legal, compliance, and corporate affairs officer at Robinhood Markets, the investigation’s news comes despite Robinhood’s attempts to register with the US securities regulators. In a blog post dated May 6, Gallagher wrote:
“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.”
Robinhood has endeavored to evade any infractions related to securities. It has previously made the decision as part of its attempts to refrain from listing specific coins or from offering crypto lending and staking services that the SEC has previously claimed to be securities offers in cases against other platforms.
However, Robinhood’s chief compliance officer pointed out that the absence of federal legal clarification created an unlevel playing field for market players, making regulatory compliance challenging and impeding the mainstream uptake of cryptocurrencies.
Regarding digital assets, the SEC and the CFTC have not yet released definitive criteria on what constitutes a security or a commodity.
