SEC issues Wells notice to Robinhood Crypto

Robinhood Markets Inc. has received a Wells notice from the U.S. SEC, warning of a possible enforcement action over its crypto operations.

According to a regulatory filing submitted Monday, the SEC’s staff has made a preliminary determination recommending that the agency pursue an enforcement action against Robinhood Crypto over its cryptocurrency listings, custody practices, and platform operations.

The potential consequences include an injunction, a cease-and-desist order, disgorgement, and other penalties or operational limitations, as stated in the filing. Robinhood disclosed that it had previously received a subpoena and has since cooperated with the SEC’s investigation.

A Wells notice allows companies to counter the SEC’s allegations before the agency proceeds with enforcement actions. However, the notice does not guarantee that formal action will be taken.

Robinhood Crypto has recently been subject to increased regulatory scrutiny as U.S. authorities intensify the focus on the rapidly evolving cryptocurrency industry.

Laura Brookover, a former CFTC enforcement official and current Consensys lawyer, criticized the SEC’s approach and questioned its focus.

“Aren’t there like… actual securities violations the SEC should be focusing on?” she asked in a post on X.

As of 9 a.m. EST, shortly after markets opened, Robinhood’s stock fell 5% following the announcement of the agency’s subpoena.