Robinhood Markets Inc. has received a warning from the US Securities and Exchange Commission (SEC) about potential enforcement action regarding its crypto business. This move by the regulator suggests that it is continuing its crackdown on digital assets. The SEC’s enforcement staff sent the company a Wells notice, which indicates a recommendation for enforcement action. As a result, Robinhood’s shares dropped over 2% in premarket trading.
The SEC has been taking a hardline stance on cryptocurrencies and has been cracking down on platforms that trade them. Robinhood, known primarily for stock trading, stated that it had previously been issued an investigative subpoena related to its cryptocurrency listings and custody. Under Chair Gary Gensler, the SEC has contended that most tokens are subject to its rules and that platforms where they are traded should be registered.
Robinhood’s chief legal officer expressed disappointment with the SEC’s move, stating that they don’t believe the assets on their platform are securities. The SEC declined to comment on the matter, but under Gensler’s leadership, it has taken action against other well-known crypto brokerages and trading platforms such as Coinbase Global Inc., indicating that it will not back off from its stance on digital assets.
Crypto advocates argue that many digital assets do not meet the standard set out in a 1946 Supreme Court case used by the SEC to determine if an asset falls under its securities rules. They urge the SEC to develop updated rules that consider the unique characteristics of this asset class to avoid unnecessary regulation of innovative technologies like blockchain and decentralized finance (DeFi).
