The U.S. Securities and Exchange Commission (SEC) sent Robinhood, a well-known trading platform, a Wells notice. After this news came out, Robinhood’s stock price dropped by 2.5% before the market opened, reaching $17.95 around 12:50 pm UTC. The Wells notice was given on May 4, as mentioned in a court document.
A Wells notice is like a letter from the SEC, saying they’ve finished looking into Robinhood’s U.S.-based crypto business.
SEC Investigates Robinhood’s Crypto Business
The Securities and Exchange Commission (SEC) has been examining Robinhood’s cryptocurrency offerings and its management of crypto assets. In a recent development, they are contemplating recommending regulatory action against Robinhood for potential securities law breaches.
Despite Robinhood’s efforts to comply with U.S. securities regulations, including attempts to register with the SEC, this news has come as a surprise. Dan Gallagher, the Chief Legal and Compliance Officer at Robinhood, conveyed disappointment in a blog post dated May 6. He highlighted the company’s longstanding cooperation with the SEC and its attempts to formalize its crypto operations through registration.
Gallagher emphasized that Robinhood does not classify any of the assets it lists as securities. In response to the SEC’s actions, he expressed readiness to engage in dialogue with the regulatory body. Robinhood aims to demonstrate why it believes there is insufficient basis for the SEC to pursue enforcement actions against its crypto business, citing both factual and legal grounds.