The Securities and Exchange Commission (SEC) has closed its investigation into Robinhood Crypto (RHC) without pursuing any enforcement actions, signaling a shift away from its previous “regulation by enforcement” approach under the new industry-friendly administration. This decision comes after a 9-month investigation into Robinhood’s crypto arm, which was initiated in response to allegations of violating securities laws.
In May 2024, the Commission’s staff issued a Wells Notice to Robinhood, indicating their intention to recommend an enforcement action against the company. However, on February 21, the SEC officially notified RHC that it would not be moving forward with any enforcement measures. Robinhood’s Chief Legal, Compliance, and Corporate Affairs Officer, Dan Gallaghers, expressed relief at the closure of the investigation, stating that it “never should have been opened.” He emphasized that Robinhood Crypto has always operated in compliance with federal securities laws and has never allowed transactions in securities.
Robinhood’s CEO and co-founder, Vladimir Tenev, also welcomed the SEC’s decision, calling it a “win for justice and the rule of law.” He urged the development of policies that support innovation and unlock the full potential of digital assets in America. The company emphasized that its crypto arm has consistently complied with the SEC, despite disagreements over the classification of digital asset transactions under federal securities laws.
The closure of the investigation into Robinhood Crypto follows the recent dismissal of a lawsuit against Coinbase by the SEC. The exchange had been embroiled in a 20-month legal battle with the Commission over allegations of operating as an unregistered securities exchange and selling unregistered securities. The SEC’s decision to withdraw the litigation against Coinbase and close the investigation into Robinhood Crypto suggests a shift towards a more collaborative and regulatory approach in the crypto industry.
In response to these developments, Robinhood has called on the SEC to move away from its “regulation by enforcement” approach and towards a more transparent and predictable regulatory framework for digital assets. The company believes that providing clarity and guidance to market participants will foster innovation and growth in the crypto market.
Overall, the closure of the investigation into Robinhood Crypto and the withdrawal of the lawsuit against Coinbase signal a new direction for the SEC in its approach to regulating the crypto industry. As the Commission establishes new units to oversee cyber and emerging technologies, it is clear that a more collaborative and proactive approach to regulation is on the horizon.