Robinhood Warned by SEC over Crypto Business: What it Means for the Future of Digital Assets
The Securities and Exchange Commission (SEC) has issued a warning to Robinhood Markets Inc. about its crypto business, indicating that it will continue its crackdown on digital assets. This news caused Robinhood’s shares to drop more than 2% in premarket trading. The SEC’s enforcement staff sent a Wells notice to the company, signaling a potential enforcement action. However, Robinhood has been given the opportunity to respond to the SEC’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 they believe the assets on their platform are not securities. In response, 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.