Regulation
Robinhood hit by SEC’s Wells notice
Last updated: May 6, 2024 at 11:37 a.m. EDT | 2 minutes of reading
Robinhood found itself in a sticky situation with the U.S. Securities and Exchange Commission (SEC) over the weekend after the digital asset trading platform reportedly received a Wells Notice from the federal agency as part of its crackdown on crypto regulation.
Robinhood Receives Wells Notice From SEC Regarding Crypto Trading
“On May 4, 2024, RHC received a “Wells Notice” from the SEC Staff (the “Staff”) stating that the Staff informed RHC that it had made a “preliminary determination” to recommend that the SEC take action coercive. v. RHC, alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, as amended,” Robinhood said in a court filing Monday.
A Wells Notice, issued by the SEC to put a given entity on notice that the federal regulator has grounds to take enforcement action against it, can lead to big legal problems for companies in the crypto industry.
The SEC just sent a Wells notice to Robinhood.
The number they have sent on crypto in recent months is astonishing. It’s hard to imagine that they could (or could) take so many coercive measures at once.
It appears they are now abusing the Wells process as an intimidation tactic.
– Jake Chervinsky (@jchervinsky) May 6, 2024
In addition to the Wells notice, court documents show that the Silicon Valley-based crypto firm has received a number of “investigative subpoenas” from the US regulator in the past, including regarding its “lists of crypto-currencies, the custody of crypto-currencies and the operation of its platform”. »
“After years of good faith attempts to work with the SEC to clarify the regulations, including our well-known attempt to ‘get in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our crypto operations in the United States. ” said Dan Gallagher, Robinhood’s Director of Legal Compliance and CEO. “We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to clearly explain how any case against Robinhood Crypto would be weak on both a factual and legal basis.”
SEC cracks down on crypto regulation
Following the news, Robhinhood stock fell by more than 5%.
News of its regulatory discipline comes at a critical time for Robinhood, with the company set to report its first-quarter results on Wednesday.
The SEC, chaired by controversial Gary Genslerhas faced scrutiny in the past for its approach to regulation by enforcement of digital assets.
Last month, the commission filed a Wells Opinion Against Consensys for allegedly operating as an unregistered securities broker through its Ethereum-focused application, MetaMask.
While it’s unclear what prompted the SEC to notify Robinhood of a possible enforcement action, the crypto company’s latest court filing suggests it could take the form of a “civil action for injunctive relief.” , a public administrative procedure and/or a cease and desist procedure”. .”
The SEC’s warning to Robinhood is the latest in a series of Wells notices sent to companies in the crypto industry and could signal a crackdown on regulation of digital assets In the coming months.