The US Securities and Exchange Commission has issued a warning to Robinhood Markets Inc. about potential enforcement action regarding its crypto business. This indicates that the regulator is continuing its crackdown on digital assets. Robinhood, primarily known for stock trading, stated that the SEC’s enforcement staff sent the company a Wells notice, which suggests a recommendation for enforcement action.
As a result of this news, the company’s shares dropped over 2% in premarket trading. However, Robinhood will have the chance to respond to the SEC’s allegations before any action is taken. Depending on their response, the SEC may back off or proceed with legal action.
Robinhood’s chief legal officer expressed disappointment with the SEC’s move, asserting that they don’t believe the assets on their platform are securities. The SEC declined to comment on the matter but under Chair Gary Gensler, they have contended that most tokens are subject to their rules and that platforms where they are traded should be registered.
In recent years, the SEC has taken action against other well-known crypto brokerages and trading platforms such as Coinbase Global Inc., highlighting their determination to enforce their regulations in this sector. Robinhood had previously been issued an investigative subpoena related to its cryptocurrency listings and custody.
The SEC uses a test outlined in a 1946 Supreme Court case to determine if an asset falls under its securities rules. However, crypto advocates argue that many digital assets do not meet this standard and urge the SEC to develop updated rules that consider the unique characteristics of this asset class.
In conclusion, it remains uncertain what actions will be taken by the SEC against Robinhood or other cryptocurrency exchanges in future enforcement actions. Still, it is clear that regulators around