Robinhood, a well-known trading platform, recently faced a setback when it received a Wells notice from the United States Securities and Exchange Commission (SEC). This notice is the result of an investigation into Robinhood’s U.S.-based crypto business and indicates that the SEC has made a “preliminary determination” to recommend enforcement action for alleged securities violations.
The news caused a 2.5% decrease in Robinhood’s share price during pre-market trading, bringing it down to $17.95. The company’s chief legal, compliance, and corporate affairs officer, Dan Gallagher, expressed disappointment with the SEC’s decision. Despite Robinhood’s efforts to work with the SEC for regulatory clarity and even trying to register, they were still saddened by the issuance of this notice relating to their U.S. crypto business.
Gallagher explained that Robinhood does not consider its listed assets to be securities, but the lack of federal regulatory clarity in the crypto space has created challenges for compliance and hindered mainstream adoption according to the company’s chief compliance officer. To avoid potential securities violations, Robinhood has taken steps such as not listing certain tokens and avoiding crypto lending and staking services that have led other platforms to lawsuits.
During a court testimony on June 6th, Gallagher compared the regulatory landscape for digital assets to the equities markets in 1932. He emphasized how fragmented state regulatory frameworks are and how there are no clear federal guidelines from both SEC and CFTC regarding the classification of digital assets as either securities or commodities.