Robinhood Receives Wells Notice from U.S. SEC, Stock Declines 2.5%

Robinhood’s stock plummeted about 2.5% during the pre-market trading on Monday, May 6, after it was revealed that it received a Wells Notice from the United States Securities and Exchange Commission (SEC) on Saturday, May 4.

The Notice was sent to Robinhood in relation to an alleged violation of Sections 15(a) and 17(a) of the Securities Exchange Act of 1934. It’s worth noting that the SEC and Robinhood have been in close communication recently regarding the company’s listing and custody of cryptocurrencies and other related services.

The company responded to the Notice in an assertive tone. It stated that it had already decided not to offer specific products or crypto tokens that the agency had identified as securities in past legal actions. Notably, Robinhood terminated support for Cardano (ADA), Solana (SOL), and Polygon (MATIC) last June, three tokens that the SEC categorised as securities in its suits against Binance and Coinbase. The firm called these “difficult choices” it had to make.

Former SEC Commissioner and now current Robinhood Chief Legal and Compliance and Corporate Affairs Officer Dan Gallagher expressed his disappointment in the regulator’s actions, especially after “years of good faith attempts” to the company had committed work with it. He noted last year that the financial watchdog was unwilling to guide the firm into cryptocurrency compliance.

The executive added that the company believes that the digital products listed on the platform are not securities and that they are looking forward to engaging the regulator to show

“how weak any case against Robinhood Crypto would be on both the facts and the law.”

Wells Notices are preliminary warnings issued by the SEC against any firm that it is confident it has sufficient information to undertake a suit against the firm.

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