US SEC Closes Robinhood Crypto Investigation With No Enforcement Action

The Securities and Exchange Commission (SEC) closed its investigation into Robinhood Crypto (RHC) without pursuing enforcement actions. This move comes amid the Commission’s efforts to move away from its previous “regulation by enforcement” approach under the new industry-friendly administration.

SEC Closes Robinhood Crypto Investigation

On Monday, Robinhood announced that the US SEC’s Enforcement Division had closed its 9-month investigation into its crypto arm without taking any enforcement measures. In May 2024, the Commission’s staff issued a Wells Notice to Robinhood, indicating that they would recommend the SEC file an enforcement action for allegedly violating securities law with its US crypto arm.

On February 21, the regulatory agency sent a letter notifying RHC about the official conclusion of the inquiry, adding that it did not intend to move forward with an enforcement action.

Robinhood’s Chief Legal, Compliance, and Corporate Affairs Officer, Dan Gallaghers, stated that the investigation “never should have been opened” but applauded the SEC’s decision to close it without action.

He affirmed that Robinhood Crypto “always has and will always respect federal securities laws and never allowed transactions in securities,” adding that any case against the firm’s crypto arm would have failed. “We’re happy to see a return to the rule of law and commitment to fairness at the SEC,” Gallagher concluded.

In an X post, Robinhood’s CEO and co-founder Vladimir Tenev called the development a “win for justice and the rule of law” He urged the development of pro-innovation policies that “unlock the full potential of digital assets in America.”

The Era Of ‘Regulation By Regulation’?

In its statement, Robinhood argued that its crypto arm, unlike other platforms, has complied with the SEC despite long disagreeing with the argument that most digital assets transactions fall under federal securities laws.

While Robinhood has long disagreed with the argument that transactions in most digital assets are subject to federal securities laws, RHC, as opposed to other platforms, made difficult choices not to provide certain products and services that the SEC under previous Chair Gensler alleged are securities in public actions.

The firm urged the SEC to continue moving away from its “regulation by enforcement” approach to “regulation by regulation” to provide market participants with “clarity and an appropriate regulatory framework for digital assets.”

This development follows the SEC’s recent dismissal of its lawsuit against Coinbase. As reported by Bitcoinist, the exchange announced the end of their 20-month-long legal battle after the Commission revealed its plan to withdraw the litigation.

In 2023, the SEC alleged that the platform was an unregistered securities exchange, suing it for operating as an unregistered broker-dealer, and legally selling unregistered securities through its staking program.

Nonetheless, the agency’s staff agreed in principle to drop the lawsuit last Friday, with only the SEC’s Commissioners approval pending. Additionally, the Commission and Binance halted their legal battle for two months, awaiting the SEC’s Crypto Task Force actions, as they could facilitate the resolution of this, and several other crypto cases.

The regulatory agency has also announced the creation of the Oyber and Emerging Technologies Unit (CETU), to protect investors and combat misconduct related to crypto and artificial intelligence (Al).