Robinhood (HOOD) has revealed that it received a warning from the Securities and Exchange Commission (SEC) due to its US crypto business. The financial services company is due to report its Q1 earnings on Wednesday, 8 May. It had revenue of $471m in Q4 2023, with more than 9% of that total coming from the fees charged on crypto transactions.
Robinhood Reveals Crypto Warning From SEC
Robinhood pointed out that the SEC warning notice was received on 4 May and is what’s known as a Wells notice. It’s based on the fact that SEC staff have recommended that action be taken due to the company’s alleged violation of registrations, which was done after the agency made a preliminary determination.
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This could lead to one of several outcomes in the future if the action leads to a public court proceeding, including a cease-and-desist order or a fine, among other options. Dan Gallagher, the chief legal and compliance officer at Robinhood, stated in a blog post:
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.
This is part of a crackdown carried out by the SEC on several crypto trading platforms in recent times, with Coinbase and Binance both running into legal issues in the last year over their crypto services. The root of the issue is whether certain assets offered on the platform are securities or not, with Robinhood believing that this isn’t the case.
