SEC to Take Action Against Robinhood for Regulatory Violation


Robinhood receives a Wells notice from the United States SEC, a potential precursor to significant enforcement action. 

Robinhood has revealed that it received a notice from the U.S. Securities and Exchange Commission (SEC) regarding its cryptocurrency listings and platform operations. Following the company’s announcement, Robinhood shares fell by about 2.5%. 

Notably, the Wells notice is a letter sent by the SEC to an expected respondent, especially after an investigation. It serves as a notification of possible charges against the respondent. The Wells notice allows the respondent to submit a reply to the ultimate decision maker.

SEC Notifies Robinhood Crypto

Dan Gallagher, Robinhood’s Chief Legal, compliance, and Corporate Affairs Officer, has reported that after years of good faith and attempts to work with the SEC for regulatory clarity, including an even “well-known attempt to register with the agency, the SEC has issued a Wells Notice related to RHC’s crypto business in the United States,” 

As detailed in the Wells notice, the U.S. SEC has investigated and summoned Robinhood Crypto (RHC) concerning its crypto-related platform operations. The agency has decided to file an enforcement action against RHC for violation.

The action may result in restraining orders, a government ban, or higher regulatory laws for RHC, as the court decides. To remedy the situation, Robinhood may need to give up whatever profits it made from violating regulatory laws or may be fined a huge sum, just like Ripple and other crypto-related companies. 

Dan Gallagher Replies to Wells Notice

Before emerging as Robinhood’s Chief Legal officer, Gallagher worked as an official with the SEC for over four years. He has a vast understanding of the U.S. securities agencies’ laws and principles for retail cryptocurrency trading companies. 

In response to the notice from the U.S. SEC, he said, “We firmly believe that the assets listed on our platform are not securities, and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”

The company has reportedly decided not to list some cryptocurrency tokens flagged as securities for trading on its platform. Also, it has refused to offer staking, borrowing, and lending services that are against the laws of the SEC.