California Attorney General Rob Bonta reached a significant milestone in cryptocurrency regulation by securing a $3.9 million settlement with Robinhood this week. The settlement addresses issues stemming from Robinhood’s failure to allow cryptocurrency withdrawals between 2018 and 2022. It also tackles the lack of transparency in the company’s trade management and order handling processes.
The settlement specifically highlights Robinhood's neglect in transferring crypto assets to customers, resulting in customers being compelled to sell their assets back to the platform. Furthermore, it accuses Robinhood of deceiving customers regarding crypto storage and trade execution, falsely claiming better pricing.
California’s First Major crypto Enforcement Targets Robinhood’s Withdrawal Practices
California Attorney General Rob Bonta's actions mark one of the state’s initial public enforcements against a cryptocurrency firm. As part of the settlement, Robinhood is now obligated to enable customers to withdraw their crypto assets to external wallets in compliance with legal standards. Moreover, the trading app must ensure that its communications with customers accurately depict its trading practices, particularly concerning order routing and crypto transaction pricing.
Robinhood Hit with SEC Wells Notice After $65M Fine for Misleading Customers
This isn't the first time Robinhood has faced regulatory scrutiny. In 2020, the SEC imposed a $65 million fine on the company for misleading customers about its revenue sources and failing to execute orders at optimal prices. The SEC accused Robinhood of selling customer orders to market makers at high rates, often depriving customers of the best trade prices.
Just earlier this year, the SEC issued a Wells Notice to Robinhood, signaling potential securities law violations in its crypto operations. Robinhood's CEO Vlad Tenev publicly criticized the agency’s actions, characterizing them as part of a broader "regulatory onslaught" against the cryptocurrency industry. Tenev argued that such moves stifle innovation and place US companies and investors at a disadvantage.
