Robinhood’s cryptocurrency division could soon be in trouble with the Securities and Exchange Commission.
In an 8-K filing submitted on Saturday, Robinhood revealed that it received a Wells notice from the SEC’s staff recommending the agency take action against the trading platform for alleged securities violations.
Robinhood says it received the Wells notice after cooperating with the SEC’s requests for investigative subpoenas about its crypto listings, custody of cryptocurrencies, and the platform’s operations.
A Well notice is a letter from the SEC that warns a company of a potential enforcement action.
The SEC’s response could include an injunction, a cease-and-desist order, disgorgement, limits on activities, and / or civil penalties.
Coinbase similarly received a Wells notice just months before the SEC sued it for breaking securities law.
In the past, the SEC has argued that some cryptocurrencies are considered securities, which would require exchanges to register with the SEC.
Robinhood could face a long legal battle if it chooses to fight the SEC’s potential enforcement action.
The Securities and Exchange Commission may soon have issues with Robinhood’s cryptocurrency division. In a Saturday 8-K filing, Robinhood disclosed that it was sent a Wells notice by the SEC’s staff, suggesting that the agency pursue legal action against the trading platform for purported securities offenses.
After assisting the SEC with requests for investigative subpoenas regarding its cryptocurrency listings, cryptocurrency custody, and platform operations, Robinhood claims to have received the Wells notice. An alert from the SEC alerting a business to possible enforcement action is called a well notice. A cease-and-desist order, disgorgement, activity limitations, an injunction, and/or civil penalties could all be part of the SEC’s response.
In a similar vein, Coinbase was served with a Wells notice shortly before the SEC filed a lawsuit against it for violating securities laws. The former CEO of the trading platform, Changpeng Zhao, is currently facing four months in prison after the SEC filed a lawsuit against Binance on similar grounds.
The Chief Legal, Compliance, and Corporate Affairs Officer of Robinhood, Dan Gallagher, released a statement saying, “We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”.
In response to the SEC’s lawsuits against other trading platforms, Robinhood claims to have already made the “difficult choice” to delist a number of tokens, including Solana, Polygon, and Cardano. The SEC has previously maintained that certain cryptocurrencies are securities and that exchanges ought to register with them. The exchanges and the registered tokens would then fall under the agency’s regulatory purview.
Robinhood may have a protracted legal battle on its hands should it decide to oppose the SEC’s possible enforcement action. The news has already caused the company’s shares to decline.
