The US Securities and Exchange Commission (SEC) has issued a warning to Robinhood Markets Inc. regarding potential enforcement action related to its crypto business. This indicates that the SEC is continuing its crackdown on digital assets, with Robinhood, primarily known for stock trading, receiving a Wells notice from the SEC’s enforcement staff, suggesting that enforcement action may be recommended.
The SEC claims that most tokens fall under its rules and that platforms where they are traded should be registered with the agency. The regulator has taken action against other prominent crypto brokerages and trading platforms, such as Coinbase Global Inc. Robinhood had previously disclosed that it received an investigative subpoena related to its cryptocurrency listings and custody.
If the SEC takes any action against Robinhood before it responds, the company’s shares dropped over 2% in premarket trading. However, before any action is taken, Robinhood will have the opportunity to respond to the allegations. In some cases, the response can persuade the SEC to reconsider. If not, the regulator may sue or settle with Robinhood to resolve the matter.
Robinhood’s chief legal officer expressed disappointment in the SEC’s move, stating that the assets listed on the platform are not considered securities by the company. However, according to a 1946 Supreme Court case outlined by the SEC, crypto advocates argue that many digital assets do not meet this standard and that revised rules should account for their unique characteristics in order to distinguish them from securities.
Under Chair Gary Gensler’s leadership at the SEC, there has been increased activity enforcing regulations in
