May 7, 2024 - Economy

Robinhood jumps into crypto fight against SEC

Illustration of Robin Hood's hat with an arrow through it.

Illustration: Allie Carl/Axios

Robinhood is jumping into the fray against the crypto industry's very own Sheriff of Nottingham.

Why it matters: The trading app arguably has less at stake than some others already caught in the SEC's crypto crackdown, but Robinhood Monday joined their publicized quest to prove the regulator wrong.

Catch up quick: The Menlo Park, Ca.-based firm disclosed Monday that the SEC was preparing to come after it for alleged securities violations posed by its crypto business.

  • The so-called Wells notice received over the weekend comes almost 18 months after the SEC had subpoenaed the company for information related to the business, back in December 2022.

What they're saying: Robinhood cofounder and chief Vlad Tenev took to social media, taking issue with "the SEC's continued attack on crypto" and vowing to "contest this matter in the courts," both defending itself and "establishing regulatory clarity."

  • Coinbase's Brian Armstrong, referencing Tenev's post, said: "Welcome to the club."

Zoom out: By many measures this is Coinbase's, or Kraken's fight — both have listed hundreds of coins on their respective crypto trading platforms.

  • Robinhood's coin offerings in the U.S., by contrast, include just 15 tokens: AAVE, BCH, DOGE, LTC, XTZ, AVAX, LINK, ETH, SHIB, UNI, BTC, COMP, ETC, XLM, and USDC, per its last annual filing.
  • And crypto chipped in just 7% of Robinhood's transaction-based revenue last year.

That list of tokens hasn't changed since it ended support for three last year — ADA, MATIC and SOL — implicated in SEC lawsuits against Coinbase and Binance.

Yes, but: Robinhood's crypto roots run deeper than that recent snapshot suggests.

  • When it was debuting as a publicly-listed company back in 2021, it touted crypto as big business (though it has mostly relied on fees generated from options trading).
  • That year, crypto accounted for almost a quarter of transaction-based revenue. And the company notes that trading activity on its platform can fluctuate in terms of asset classes due to seasonal trends and macro-driven factors.

The intrigue: In the first quarter of 2021, more than a third of Robinhood's crypto business was driven by dogecoin, the firm said in their S-1.

  • It isn't clear to what extent dogecoin is carrying that business now, but it's notable as the meme coin is the only other coin on a list of safeguarded user cryptocurrencies, alongside bitcoin and ether — meaning what Robinhood has in custody for users is accounted as assets on its balance sheet.

Our thought bubble: How much is that DOGE worth sitting in the app window? Shareholders might want to know, that is if Robinhood is winding up for a lengthy legal battle.

What we're watching: Robinhood is set to report first quarter earnings tomorrow after the market's close, when the public will get a better idea of what that dog is and how much it's worth now.

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