SEC Closes Robinhood Crypto Investigation
On Monday, Robinhood announced that the US SEC’s Enforcement Division had closed its 9-month investigation into its crypto arm without taking any enforcement measures. Initially, in May 2024, the Commission’s staff issued a Wells Notice to Robinhood, signaling that they would recommend filing an enforcement action for allegedly violating securities law with its US crypto arm.
In a letter dated February 21, the regulatory agency notified Robinhood Crypto (RHC) about the official conclusion of the inquiry, affirming that it did not intend to move forward with any enforcement action.
Dan Gallaghers, Robinhood’s Chief Legal, Compliance, and Corporate Affairs Officer, stated that the investigation “never should have been opened,” and welcomed the SEC’s decision to close it without action. He emphasized that Robinhood Crypto has always respected federal securities laws and has never facilitated transactions in securities, asserting that any case against the firm’s crypto arm would have failed. “We’re happy to see a return to the rule of law and commitment to fairness at the SEC,” he concluded.
Robinhood’s CEO and co-founder Vladimir Tenev expressed on X that this development is a “win for justice and the rule of law,” calling for pro-innovation policies that would unlock the full potential of digital assets in America.
The Era Of ‘Regulation By Regulation’?
In its statement, Robinhood argued that its crypto arm, unlike other platforms, has complied with the SEC despite long disputing the characterization that most transactions involving digital assets fall under federal securities laws.
While Robinhood has long disagreed with the argument that transactions in most digital assets are subject to federal securities laws, RHC, as opposed to other platforms, made difficult choices not to provide certain products and services that the SEC under previous Chair Gensler alleged are securities in public actions.
The firm encouraged the SEC to transition away from its “regulation by enforcement” model to a more structured “regulation by regulation” approach, providing market participants with clarity and the appropriate regulatory framework for digital assets.
This announcement aligns with the recent developments within the SEC, including the dismissal of its lawsuit against Coinbase. As reported, the exchange concluded its 20-month-long legal battle after the SEC revealed its intention to withdraw the litigation.
In 2023, the SEC alleged that Coinbase was operating as an unregistered securities exchange, but the agency’s staff recently agreed in principle to drop these allegations. Similarly, the Commission and Binance have paused their legal proceedings, awaiting potential resolutions facilitated by the SEC’s Crypto Task Force.
Moreover, the SEC has launched the Cyber and Emerging Technologies Unit (CETU) to enhance investor protection and combat misconduct related to crypto and artificial intelligence (AI).
