The U.S. Securities and Exchange Commission (SEC) has closed its investigation into Robinhood Crypto, the digital asset division of trading platform Robinhood Markets. The regulator informed Robinhood on Feb. 21 that it would not take any enforcement action. Robinhood publicly disclosed this update on Feb. 24.
SEC Closes Investigation Into Robinhood Crypto with No Action. Source: XSEC Had Been Investigating Robinhood for Nearly a Year
The SEC began investigating Robinhood’s cryptocurrency business in 2024. On May 4, 2024, the regulator issued a Wells notice to the company. A Wells notice is a formal warning that the SEC may take legal action based on suspected violations.
The SEC’s investigation focused on Robinhood’s crypto listings and custody operations. Regulators were assessing whether Robinhood had offered digital assets that should be classified as securities, which would require additional regulatory compliance.
Following news of the Wells notice, Robinhood’s stock fell 2.5% in pre-market trading, dropping to $17.95. Despite the SEC’s concerns, Robinhood consistently maintained that none of the digital assets on its platform were securities.
Robinhood Previously Paid $45 Million to Settle SEC Claims
Before the SEC closed its investigation, Robinhood had already agreed to pay $45 million in a settlement related to separate regulatory violations. On Jan. 13, the SEC ruled that Robinhood had violated more than 10 securities laws and that the company had admitted to certain findings.
Robinhood Says SEC Investigation Was Unnecessary
After the SEC dropped its case, Robinhood’s Chief Compliance Officer, Dan Gallagher, criticized the investigation, saying:
This investigation never should have been opened. Robinhood Crypto always has and will always respect federal securities laws.
Gallagher also emphasized that Robinhood had never allowed transactions involving securities on its crypto platform.
Robinhood has long argued that U.S. crypto regulations are unclear. The company believes that the SEC should provide clearer guidelines instead of regulating through enforcement actions.
The SEC and the Commodity Futures Trading Commission (CFTC) have yet to establish clear definitions of which digital assets are considered securities and which are commodities.
More recently, Coinbase announced that the SEC agreed to dismiss its lawsuit against the crypto exchange. The lawsuit, initiated in 2023, accused Coinbase of operating as an unregistered securities exchange, broker, and clearing agency.
Crypto Task Force Intends to End Major Lawsuits
President Donald Trump’s administration is making big changes to crypto policies. Soon after Trump took office on Jan. 20, the SEC created a Crypto Task Force to reform industry regulations.
The task force is led by Hester Peirce, a pro-crypto SEC Commissioner. She has promised to fix the regulatory issues left by former SEC Chair Gary Gensler.
Former SEC official John Reed Stark believes the SEC may drop enforcement actions against Robinhood, Coinbase, Binance, and Ripple.
Former SEC official John Reed Stark said that SEC’s enforcement actions against industry will end soon. Source: XStark pointed this out after the SEC asked for a 28-day extension in its case against Coinbase.
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