Robinhood, a trading app and brokerage, disclosed in its annual financial filing on Monday that it had been subpoenaed by the U.S. Securities and Exchange Commission regarding its cryptocurrency services.
The subpoena, which was received in December, shortly after bankruptcy filing of collapsed crypto exchange FTX, requested information on topics including cryptocurrency listings, custody of cryptocurrencies, and platform operations. Robinhood later stated in the filing that it facilitates customer trades for specific cryptocurrencies that have been evaluated according to its internal policies and procedures, and that the company believes are not subject to US federal and state securities laws.
The American commission-free broker also noted that legal action from the SEC could result in the company being forced to halt digital asset trades on its platform, as it is required to list potential risks to its business.
Robinhood said:
To the extent that the SEC or a court determines that any cryptocurrencies supported by our platform are securities, that determination could prevent us from continuing to facilitate trading of those cryptocurrencies (including ceasing support for such cryptocurrencies on our platform). It could also result in regulatory enforcement penalties and financial losses in the event that we have liability to our customers and need to compensate them for any losses or damages. We could be subject to judicial or administrative sanctions for failing to offer or sell the cryptocurrency in compliance with securities registration requirements, or for acting as a securities broker or dealer without appropriate registration.
Over the last year, Robinhood has experienced growth in its crypto trading business, even though market downturns. However, the trading platform’s crypto trading revenues for the fourth quarter of 2022 registered a 24% decrease compared to the previous quarter.
