US Regulatory Crackdown: Robinhood Faces SEC Investigation

SEC has been intensively investigating various cryptocurrency industry platforms and exchanges, and the latest to receive a Wells notice is financial services platform Robinhood.

Robinhood is a well-known financial services platform that has gained popularity among retail investors due to its commission-free trading model. During the previous retail investor frenzy against Wall Street financial giants, Robinhood was the primary trading platform for retail investors. At the time, Robinhood even implemented policies such as pulling the plug and changing terms to limit retail investor trading, which was seen as secretly helping Wall Street financial giants.

The SEC has announced that it will investigate Robinhood's cryptocurrency business, which offers cryptocurrency buying and selling services. Although the SEC has not yet filed a lawsuit, the Wells notice indicates that the SEC will take action and require Robinhood to cooperate with the investigation.

In response, Robinhood has decided to delist certain cryptocurrency products or tokens, mainly those that the SEC has previously deemed as securities in enforcement actions. The SEC believes that platforms providing certain cryptocurrency trading services are equivalent to providing securities trading services, and therefore, platforms should register with the SEC before offering such services, or risk violating the law.

In 2022-2023, the SEC launched several investigations and lawsuits, listing multiple cryptocurrency products or tokens as securities and taking legal action against related platforms. Robinhood still offers trading services for some cryptocurrencies.

Robinhood's chief legal officer stated that the company believes the cryptocurrency assets it provides are not securities and looks forward to cooperating with regulatory agencies. However, he also revealed that they had previously attempted to cooperate with the SEC but were disappointed with the results.

As a publicly listed company, Robinhood has also disclosed the potential consequences of the SEC investigation, including but not limited to civil injunctions, public administrative proceedings, and/or cease-and-desist orders. The SEC may also seek remedies such as injunctions, cease-and-desist orders, disgorgement of illegal gains, prejudgment interest, civil penalties, and revocation of licenses.