Robinhood has officially responded to a Wells Notice from the US Securities and Exchange Commission (SEC), which challenges its operations.
This notice hints at possible enforcement actions related to Robinhood Crypto (RHC), the firm’s crypto division.
Robinhood ‘Disappointed’ With SEC Wells Notice
Dan Gallagher, Robinhood’s Chief Legal, Compliance, and Corporate Affairs Officer, expressed disappointment with the regulatory agency’s decision.
“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business,” Gallagher stated.
Robinhood argues that the cryptocurrencies listed on its platform do not qualify as securities and is ready to demonstrate the weakness of any SEC case against it factually and legally. The firm navigates cautiously with the regulatory reality, opting not to list certain tokens and avoiding services like crypto lending and staking, which the SEC has previously targeted on other platforms.
The firm has also attempted to register a special purpose broker-dealer specifically to align with SEC regulations, showcasing its commitment to compliance.
Read more: How to Buy and Sell Crypto on Robinhood: A Step-by-Step Guide
However, the SEC argues that Robinhood uses the “Overview” tab of its Investor Relations website and its Newsroom to disseminate information to the public in a broad and non-exclusive way for purposes of the SEC’s Rule of Fair Disclosure.
“As it was revealed that Robinhood Crypto, LLC (“RHC”) received investigative subpoenas from the Securities and Exchange Commission (“SEC”) and on May 4, 2024, RHC received a “Wells Notice” stating that staff had informed RHC that it had made a “preliminary determination” to recommend that the SEC file an enforcement action against RHC alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934″, SEC commented in a note.
This situation unfolds as the SEC scrutinizes the cryptocurrency market, focusing on compliance and the classification of digital assets. Robinhood’s ongoing dialogue with the SEC highlights the broader industry’s challenges in navigating an evolving regulatory framework.
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