Robinhood Crypto Receives Wells Notice From SEC

News | May 23, 2024 By:

On Monday, May 6, 2024, Robinhood Crypto (RHC) said it received a “Wells Notice” from the U.S. Securities and Exchange Commission (SEC). In a blog post, Robinhood Chief Legal, Compliance, and Corporate Affairs Officer Dan Gallagher revealed that the SEC notified the company on May 4th that regulators planned to bring an enforcement action against the cryptocurrency platform.

A Wells Notice indicates that the SEC’s enforcement division staff have preliminarily decided to recommend filing an enforcement action. However, it does not necessarily mean that the recipient has engaged in any wrongdoing. Gallagher stated that RHC firmly believes the digital assets available on its platform, such as bitcoin and other cryptocurrencies, should not be considered securities. He said the company looks forward to interacting with the SEC to clarify why any case against Robinhood Crypto would be lacking merit.

The SEC has taken a stern stance, arguing that most cryptocurrency tokens meet the definition of securities and are therefore subject to registration rules. However, cryptocurrency exchanges like RHC and Coinbase maintain that assets in the blockchain and crypto space such as bitcoin are unlike traditional stocks and bonds. They do not qualify as securities under the law. Coinbase is also currently involved in legal proceedings with the SEC over similar allegations.

As one of the largest retail-focused cryptocurrency brokers, RHC allows customers to deposit and withdraw select digital currencies from its custodial service. It also routes order flows to liquidity providers to execute trades at the lowest available price. The company has been trying for two years to formally register as a broker-dealer with the SEC.

If discussions do not resolve the issue, Robinhood CEO Vlad Tenev signaled that they are prepared to litigate the matter in court to defend their position.