SEC Drops Robinhood Investigation, Takes No Action
The US Securities and Exchange Commission (SEC) has closed its investigation into Robinhood without pursuing an enforcement action.
On 21 February, the SEC's Enforcement Division informed Robinhood that it had concluded its probe, which commenced when the exchange received a Wells Notice in May 2024.
"On May 4, 2024, RHC (Robinhood Crypto) received a 'Wells Notice' from the Staff of the SEC (the 'Staff') stating that the Staff has advised RHC that it made a 'preliminary determination' to recommend that the SEC file an enforcement action against RHC alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, as amended," the trading platform revealed at the time.
A Wells Notice is usually sent ahead of launching a formal lawsuit. Coinbase, Uniswap Labs, Ripple, Consensys, and BUSD issuer Paxos are on the list of crypto firms that have received such notices.
Dan Gallagher, chief legal, compliance, and corporate affairs officer at Robinhood lauded the SEC's latest decision. “We applaud the staff’s decision to close this investigation with no action,” Gallagher said.
“Let me be crystal clear—this investigation never should have been opened. Robinhood Crypto always has and will always respect federal securities laws and never allowed transactions in securities. As we explained to the SEC, any case against Robinhood Crypto would have failed. We appreciate the formal closing of this investigation, and we are happy to see a return to the rule of law and commitment to fairness at the SEC.”
Robinhood has long pushed back against the argument that transactions involving most digital assets fall under federal securities laws and deliberately avoided offering products that the SEC had deemed were securities.
“Instead of regulation by enforcement, it’s time for the SEC to turn to regulation by regulation—providing market participants with clarity and an appropriate regulatory framework for digital assets,” Robinhood stated.
The SEC's pullback comes as the regulator also revealed it is closing its investigation into OpenSea and is dropping its lawsuit against Coinbase.
OpenSea founder and CEO Devin Finzer made the announcement on X, describing it as a "win" and that the regulator's initial attempt to classify NFTs as securities "would have been a step backward—one that misinterprets the law and slows innovation."
Meanwhile, Coinbase’s chief legal officer, Paul Grewal, said the SEC has agreed “in principle” to dismiss the lawsuit, which accused the exchange of failing to register as a securities platform. The SEC will now vote on dismissing the lawsuit at some point this week.