Robinhood agrees to conform to standards set out by California Commodities Law (CCL).
Robinhood Crypto, the crypto-focused division of Robinhood Markets, has agreed to pay $3.9 million to settle alleged violations of California’s consumer protection laws. Having addressed the state’s concerns by agreeing to pay $3.9 million, the subsidiary has resolved the allegations.
Why Robinhood Agrees to $3.9M Settlement
The California Department of Justice (DOJ) recently published a press release detailing the consumer protection laws violated by Robinhood. The announcement stated that the popular trading platform sold commodities contracts without allowing customers to withdraw their crypto assets. Users were forced to sell them back to Robinhood to exit the platform.
DOJ also stated that Robinhood’s advertising was misleading. The company claimed to connect to multiple trading venues to ensure customers received the most competitive prices, but this was not always the case.
Additionally, Robinhood assured customers that it held all purchased crypto, when in fact, customer assets were sometimes held by trading venues for extended periods. These practices from 2018 to 2022, led to the previously mentioned settlement.
What’s Next for Robinhood?
As part of the settlement, Robinhood is required to make significant changes to its business practices. It must allow customers to withdraw their crypto assets to their wallets, giving them full control over their funds.
Additionally, the company must accurately represent its trading and order handling practices, including how orders are routed to trading venues and the prices at which assets are bought and sold.
Robinhood must also clearly disclose its crypto custody arrangements and update its Customer Agreement to notify customers of potential delays in settlement due to security concerns. Furthermore, it must report any incidents causing delayed settlement of over one week to the DOJ for transparency and accountability purposes.
Crypto Regulations Increase
Being the first action by the California Department of Justice against a crypto company, Attorney General Rob Bonta said:
“Our investigation and settlement with Robinhood should send a strong message: Whether you’re a brick-and-mortar store or a cryptocurrency company, you must adhere to California’s consumer and investor protection laws. I am dedicated to using all the tools available to my office to protect California consumers in the face of advancing technology in the marketplace.”
This year has been marked by several crypto regulatory updates in different regions of the world. Crypto exchange Binance recently got approved and registered in India. Earlier this month, Qatar released a new framework for digital assets.