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Photo: Robinhood

It looks like a new checking account that pays 3% interest is not going to fly. Broker-dealer Robinhood announced the product with great fanfare on Thursday, saying that money deposited in its new checking and savings accounts would be protected up to $250,000 by the SIPC, which guarantees cash in brokerage accounts.

The bottom line: Robinhood is trying to game the system. It's a brokerage masquerading as a bank. It wants to get the advantages of being a bank, like deposit insurance and maturity transformation, without the concomitant regulatory oversight. That's very unlikely to fly.

What they're saying: Stephen Harbeck, the president and CEO of the SIPC, tells Axios that he never heard from Robinhood before the announcement, and that he will not insure such a product.

  • He only protects cash which is being used with the intention of purchasing securities. "Money that is doing nothing but earning interest looks like a loan," he says. "We do not protect loans to a broker-dealer."
  • The Robinhood website says that its checking account is insured by the SIPC and that “You do not need to invest to use Robinhood Checking & Savings."
  • "That statement is incorrect as a matter of law," says Harbeck. The Securities Investor Protection Act of 1970 does not protect money which is not being used to invest in securities.

Robinhood spokesperson: “We added new features to our Robinhood brokerage platform and are thrilled to give customers the opportunity to invest, save, and manage their money all in one Robinhood brokerage account. Robinhood brokerage accounts are protected by SIPC insurance.”

Go deeper

Tech scrambles to derail inauguration threats

Illustration: Sarah Grillo/Axios

Tech companies are sharing more information with law enforcement in a frantic effort to prevent violence around the inauguration, after the government was caught flat-footed by the Capitol siege.

Between the lines: Tech knows it will be held accountable for any further violence that turns out to have been planned online if it doesn't act to stop it.

Dave Lawler, author of World
2 hours ago - World

Uganda's election: Museveni declared winner, Wine claims fraud

Wine rejected the official results of the election. Photo: Sumy Sadruni/AFP via Getty

Yoweri Museveni was declared the winner of a sixth presidential term on Saturday, with official results giving him 59% to 35% for Bobi Wine, the singer-turned-opposition leader.

Why it matters: This announcement was predictable, as the election was neither free nor fair and Museveni had no intention of surrendering power after 35 years. But Wine — who posed a strong challenged to Museveni, particularly in urban areas, and was beaten and arrested during the campaign — has said he will present evidence of fraud. The big question is whether he will mobilize mass resistance in the streets.

Off the Rails

Episode 1: A premeditated lie lit the fire

Photo illustration: Sarah Grillo/Axios. Photo: Chip Somodevilla/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 1: Trump’s refusal to believe the election results was premeditated. He had heard about the “red mirage” — the likelihood that early vote counts would tip more Republican than the final tallies — and he decided to exploit it.

"Jared, you call the Murdochs! Jason, you call Sammon and Hemmer!”