Robinhood CEO Pledges to Challenge SEC Claims Following Wells Notice
Robinhood chief executive Vlad Tenev vowed that the fintech firm would defend itself and advocate for its clients following the Wells Notice that the US Securities and Exchange Commission (SEC) served.
Tenev decried the actions undertaken by the Gary Gensler-led SEC despite the fintech firm’s efforts to register with the regulator. The Robinhood chief revealed the firm met the regulator 16 times to secure approval as a special purpose broker-dealer that supports crypto assets.
Robinhood Chief Questions SEC’s Priorities Following Wells Notice
Tenev disclosed during CNBC’s business show Last Call that the stock trading firm’s representatives met the SEC 16 times. Despite the efforts undertaken by Robinhood in good faith, the SEC failed to reciprocate and instead sent the Wells Notice.
The Robinhood chief revealed that SEC informed his team that they could not keep meeting regarding the issue, admitting they hardly saw a path towards the registration. Tenev admitted it was difficult to explain the reason behind the SEC’s decision.
Tenev profiling of the SEC’s actions echoes the confession by Robinhood Markets head of legal, compliance, and corporate Dan Callagher, who testified in a Congressional session that the fintech firm met over a dozen times. The legal executive informed legislators that Robinhood held multiple meetings and calls for over 18 months regarding the crypto business and listing process.
Robinhood Crypto Acknowledges Wells Notice from SEC
The SEC served the digital assets division of the fintech firm – Robinhood Crypto with a Wells Notice. It informed the firm of the securities watchdog’s intention to initiate proceedings or civil enforcement action against Robinhood.
The Wells Notice served to Robinhood coincides with the SEC issuing several regulatory warnings targeting US crypto firms. Recently, the SEC issued Well Notices to the developer behind decentralized exchange (DEX) Uniswap Labs and Ethereum software giant Consensys.
Tenev lamented that the SEC overlooked Robinhood efforts and instead opted to regulate by enforcement. The executive questioned the SEC’s approach despite being able to change the rules that would allow brokers to accommodate digital assets.
Tenev confessed that Robinhood did not desire to get into the present situation, though it vowed it would defend itself. The executive reiterated that crypto assets have become essential to appoint that it becomes inevitable for Robinhood not to facilitate Americans’ access to them.
Analysts Predict Robinhood to Prevail Against SEC’s Well-Notice
The Keefe, Bruyette & Woods (KBW) analysts predict Robinhood will win over the SEC in court following the regulator’s surprising Wells Notice. The KBW report considers Robinhood’s conservative approach to crypto assets listing, which yields a higher likelihood of a prevailing case with the regulator, unlike other US-based competitors.
The Monday, May 6 report by KBW and the Wells Notice by the Gensler-led SEC is surprising, considering Robinhood offers fifteen crypto assets on the US platform, unlike rivals with over 200 listings.
KBW lead analyst Kyle Voigt downplayed the likelihood of Robinhood changing its crypto operations and listings. However, the analyst anticipates that the SEC will level charges against the fintech firm in the coming months.
KBW analysts hold the preliminary view that the Tenev-led firm will fight the SEC in court and is more likely to triumph, given the stricter listing standards.
KBW report reveals that crypto trading accounts for 12% of the Robinhood earnings and considers that the SEC will pursue a subset of the crypto assets listed. The report considers the worst-case scenario that would emerge if the regulator classifies Ether (ETH) as security since it constitutes 25% of Robinhood’s crypto trading.
KBW report indicated that Robinhood shareholders will wait until late next year to have total clarity on the case’s potential outcome. The analyst stated that the suit could take longer, as in the ongoing lawsuit involving the crypto exchange Coinbase (COIN).
Robinhood Realizes Record Crypto Revenue
Robinhood is leveraging the crypto comeback in 2024 to post record quarterly earnings and net income that beat analysts’ expectations. The firm’s crypto earnings surged nearly 3X from $43M realized in 2023’s Q4 to $126M in 2024’s first quarter.
Meanwhile, the NASDAQ-listed Robinhood is on course to realize its $20 price target. According to Google Finance data, the stock (HOOD) is exchanging hands at $17.30, a 3.08% dip in the past 24 hours.
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