The US Securities and Exchange Commission (SEC) has issued a warning to Robinhood Markets Inc. about potential enforcement action regarding its crypto business. This suggests that the regulator is continuing its crackdown on digital assets. As a result, the company’s shares dropped over 2% in premarket trading.
Robinhood will have the chance to respond to the SEC’s allegations before any action is taken. Depending on the 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, it has contended that most tokens are subject to its rules and that platforms where they are traded should be registered.
The SEC uses a test outlined in a 1946 Supreme Court case to determine if an asset falls under its securities rules. 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 the asset class. Robinhood had previously been issued an investigative subpoena related to its cryptocurrency listings and custody.
