The US Securities and Exchange Commission has issued a warning to Robinhood Markets Inc. over its crypto business, indicating that the regulator is continuing its crackdown on digital assets. Robinhood, primarily known for its stock trading platform, received a Wells notice from the SEC’s enforcement staff, signaling a potential enforcement action.
This news caused the company’s shares to drop more than 2% in premarket trading. The SEC will have the opportunity to respond to Robinhood’s allegations before any action is taken, and the outcome could result in a lawsuit or settlement with the regulator.
Robinhood’s chief legal officer expressed disappointment at the SEC’s decision, stating that the company believes the assets on its platform are not securities. The SEC has not commented on the matter but has previously taken action against other crypto brokerages and trading platforms like Coinbase Global Inc. This latest development comes after an investigative subpoena was issued to Robinhood related to its cryptocurrency listings and custody procedures.
The SEC under Chair Gary Gensler maintains that most tokens are subject to SEC rules and platforms facilitating their trade should be registered with the agency. The determination of whether an asset falls under the SEC’s securities regulations is based on a test established in a 1946 Supreme Court case. While crypto advocates argue that many digital assets do not meet this standard, they are calling for updated guidelines that recognize the unique characteristics of cryptocurrencies.
