The U.S. Securities and Exchange Commission (SEC) has sent Robinhood Markets Inc. a Wells notice, which is a big deal because it means the Securities and Exchange Commission may take action against its cryptocurrency activities.
A regulatory filing made on Monday says that the SEC staff has tentatively suggested that the agency take enforcement action against Robinhood Crypto over different parts of its cryptocurrency offerings, custody practices, and platform operations.
The filing lists possible outcomes such as injunctions, cease-and-desist orders, losing profits, and other fines or limits on operations. Robinhood said it had been served with a subpoena and has been helping the Securities and Exchange Commission with its probe.
Before the SEC takes formal enforcement action, a Wells notice allows companies to react to the agency’s claims. It doesn’t mean that the Securities and Exchange Commission will take those steps.
SEC’s Heightened Scrutiny Amidst Growing Cryptocurrency Regulation
This comes at a time when regulators are paying more attention to Robinhood Crypto and the cryptocurrency business as a whole. Due to the fast growth of the business, U.S. authorities have been stepping up their regulatory oversight.
Laura Brookover, a lawyer for Consensys who used to work as an enforcement official for the Commodity Futures Trading Commission (CFTC), said bad things about the Securities and Exchange Commission approach and its goals. She asked in a post on X, “Aren’t there like… real securities violations the Securities and Exchange Commission should be focusing on?”
As soon as the SEC subpoena was made public, Robinhood’s stock dropped sharply, falling by 5% right after the markets started at 9 a.m. EST. This shows how the market feels about the problems the popular trading platform’s crypto activities are facing with regulators.
